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Co-integration and the term structure of Finnish short-term interest rates

Markku Lanne

Finnish Economic Papers, 1995, vol. 8, issue 1, 3-16

Abstract: The term structure of Finnish HELIBOR interest rates is studied by modelling it as a co-integrated system. There are three co-integrating vectors among the six rates. They can be identified as the spreads between the two and one and three and one month rates, and a third vector tending to keep the yield curve linear. Co-integration analysis of partial systems suggests that it is only for the three shortest-term yields that the expectations hypothesis cannot be rejected. Recursive analysis reveals that the co-integratioll space has changed in time, which is not surprising given the changes in monetary policy regimes.

JEL-codes: C32 E43 (search for similar items in EconPapers)
Date: 1995
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Handle: RePEc:fep:journl:v:8:y:1995:i:1:p:3-16