Regime Switches in Interest Rates
Andrew Ang () and
Geert Bekaert ()
Journal of Business & Economic Statistics, 2002, vol. 20, issue 2, 163-82
We examine the econometric performance of regime-switching models for interest rate data from the United States, Germany, and the United Kingdom. Regime-switching models forecast better out-of-sample than single-regime models, including an affine multifactor model, but do not always match moments very well. Regime-switching models incorporating international short-rate and term spread information forecast better, match sample moments better, and classify regimes better than univariate regime-switching models. Finally, the regimes in interest rates correspond reasonably well with business cycles, at least in the United States.
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Working Paper: Regime Switches in Interest Rates (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:20:y:2002:i:2:p:163-82
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