 Modeling the U.S. Short-Term Interest Rate by Mixture Autoregressive ProcessesMarkku Lanne and Pentti Saikkonen Journal of Financial Econometrics, 2003, vol. 1, issue 1, 96-125 Abstract: A new kind of mixture autoregressive model with GARCH errors is introduced and applied to the U.S. short-term interest rate. According to the diagnostic tests developed in the article and further informal checks, the model is capable of capturing both of the typical characteristics of the short-term interest rate: volatility persistence and the dependence of volatility on the level of the interest rate. The model also allows for regime switches whose presence has been a third central result emerging from the recent empirical literature on the U.S. short-term interest rate. Realizations generated from the estimated model seem stable and their properties resemble those of the observed series closely. The drift and diffusion functions implied by the new model are in accordance with the results in much of the literature on continuous-time diffusion models for the short-term interest rate, and the term structure implications agree with historically observed patterns. , . Date: 2003 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:jfinec:v:1:y:2003:i:1:p:96-125 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Financial Econometrics is currently edited by Allan Timmermann and Fabio Trojani More articles in Journal of Financial Econometrics from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC. |
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