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Switching regime models in the Spanish inter-bank market

Arielle Beyaert () and Juan rez-Castej

The European Journal of Finance, 2000, vol. 6, issue 2, 93-112

Abstract: Nonlinear present value models are adjusted to data from the Spanish inter-bank market between 1986 and 1992, with the ultimate objective of testing the rational expectations hypothesis of the term structure of the interest rates. The nonlinearity stems from using models with two stochastically switching regimes. The models are submitted to various specification tests and are compared with linear present value models. Very clearly differentiated regimes are identified, the analysis of the results in the light of the institutional, political and economic events that affected the Spanish economy during the period of study demonstrates the usefulness of this type of models. The expectation hypothesis is, however, rejected.

Keywords: Interest Rates Term Structure Markov Process Switching Regimes Rational Expectations Nonlinearity (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1080/13518470050020789

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