A general equilibrium (GE) model of the term structure applied to Australian securities

Bruce Felmingham and W. Norton Grey

Applied Economics Letters, 1998, vol. 5, issue 11, 685-687

Abstract: The Double Square Root (DSR) GE model of the term structure is fitted to Australian security yield data over the period 2 January 1984 to 15 December 1995 - a data set of 3041 yields on four securities: 30 and 90-day BAB: and 5 and 10-year bonds. Applying both the OLS and GMM estimators we find a nonlinear, reduced form relationship between these yields and the risk free rate. So we conclude that GE models explain a diverse range of Australian yield curve shapes and that Australian bond prices are not necessarily inversely related to interest rates.

Date: 1998
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DOI: 10.1080/135048598354122

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