The Role of Asymmetries and Regime Shifts in the Term Structure of Interest Rates

Richard H. Clarida, Lucio Sarno (), Mark P. Taylor () and Giorgio Valente ()
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Richard H. Clarida: Columbia University and National Bureau of Economic Research

Journal of Business, 2006, vol. 79, issue 3, pages 1193-1224

Abstract: We examine the term structure of interest rates for the United States, Germany, and Japan over the period 1982–2000, using a nonlinear multivariate vector equilibrium correction-modeling framework that allows for asymmetric adjustment and regime shifts. The model has a very general underlying theoretical rationale that allows for time-varying term premia and other short-run deviations from the expectations model of the term structure. The empirical models fit well, display regime switches closely correlated with key monetary policy variables, and have good forecasting properties.

Date: 2006
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Related works:
Working Paper: The Role of Asymmetries and Regime Shifts in the Term Structure of Interest Rates (2004)
Working Paper: The Role of Asymmetries and Regime Shifts in the Term Structure of Interest Rates (2005)
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