The Predictive Power of Yield Spreads for Future Interest Rates: Evidence from the Danish Term Structure
Tom Engsted () and
Carsten Tanggaard ()
Scandinavian Journal of Economics, 1995, vol. 97, issue 1, 145-59
The predictive power of yield spreads for future interest rates is examined using a new database of zero-coupon bonds yields from the Danish bond market. The evidence shows that during the period of monetary targeting, 1976:1-1985:7, yield spreads have substantial predictive power and the results tend to support the rational expectations version of the classical expectations theory of the term structure. However, for the recent period 1985:8-1991:12, characterized by a shift to a policy of interest rate targeting, the predictive power of yield spreads disappears. Copyright 1995 by The editors of the Scandinavian Journal of Economics.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:97:y:1995:i:1:p:145-59
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Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten
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