Testing the expectations hypothesis when interest rates are near integrated

Meredith Beechey (), Erik Hjalmarsson and Pr Sterholm
Authors registered in the RePEc Author Service: Pär Österholm

Journal of Banking & Finance, 2009, vol. 33, issue 5, 934-943

Abstract: Nominal interest rates are unlikely to be generated by unit-root processes. Using data on short and long interest rates from eight developed and six emerging economies, we test the expectations hypothesis using cointegration methods under the assumption that interest rates are near integrated. If the null hypothesis of no cointegration is rejected, we then test whether the estimated cointegrating vector is consistent with that suggested by the expectations hypothesis. The results show support for cointegration in 10 of the 14 countries we consider, and the cointegrating vector is similar across countries. However, the parameters differ from those suggested by theory. We relate our findings to existing literature on the failure of the expectations hypothesis and to the role of term premia.

Keywords: Bonferroni; tests; Cointegration; Expectations; hypothesis; Near; integration; Term; premium (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378-4266(08)00237-9
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Testing the expectations hypothesis when interest rates are near integrated (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:5:p:934-943

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().