Are Term Premiums Predictable in Central European Countries? The Forward Rates Agreements (FRA) Application

Petr Makovský

Eastern European Economics, 2024, vol. 62, issue 2, 187-218

Abstract: The aim of this paper is to decide whether or not term premiums appear and thus are predictable in Central European countries in the data sample of forward rate agreement interest rates and corresponding spot interest rates. Term premiums theoretically are explained thanks to the applications of the efficient market hypothesis theory, the expectations theory, and the liquidity preferences theory. Empirically, we used cointegration techniques for nonstationary time series, mainly using the cointegration method (simple and even for panel data) and the vector error correction model. We used data samples of Central European countries (the Czech Republic, Hungary, Poland) and also of the United Kingdom. We found that the best future estimate of term premiums is its current value. It does not refer in the same way to the market efficiency hypothesis (EMH) or theexpectations hypothesis (EH).

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00128775.2022.2102507 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:eaeuec:v:62:y:2024:i:2:p:187-218

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MEEE20

DOI: 10.1080/00128775.2022.2102507

Access Statistics for this article

More articles in Eastern European Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().