Uncovering the US term premium: An alternative route
Luis Gil-Alana () and
Antonio Moreno ()
Journal of Banking & Finance, 2012, vol. 36, issue 4, 1181-1193
The estimates of the US term premium crucially depend upon the ex-ante decision on whether the short-term rate is either an I(0) or an I(1) process. In this paper we estimate a fractionally integrated (I(d)) model which simultaneously determines both the order of integration of the short-term rate and the associated term premium. We show that the term premium experienced a sharp increase from essentially zero in mid-2007 to almost 3% in 2009. We also show that unemployment and term premium dynamics exhibit a very significant positive co-movement.
Keywords: Interest rates; Term premium; Fractional integration (search for similar items in EconPapers)
JEL-codes: E4 G1 C5 (search for similar items in EconPapers)
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Working Paper: Uncovering the U.S. Term Premium: An Alternative Route (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:4:p:1181-1193
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