Term Structure Anomalies: Term Premium or Peso problem?

Caroline Jardet ()

Working papers from Banque de France

Abstract: The goal of this paper is to develop a test for the relative importance of the time-varying term premium and the peso-problem for rejection of the Expectation Hypothesis of the Term Structure (EHTS). Our reasoning is based on a term structure model that allows for both phenomena simultaneously. If we assume that only one regime is observed ex-post, we can estimate all the information we need to evaluate distortions generated by both hypotheses. We can also test the presence of a peso-problem. Firstly we find that a peso-problem might explain rejection of the EHTS in Germany and the United Kingdom after the European exchange rate crisis. Secondly, we show that this explanation appears inappropriate to explain the EHTS failure in the United States.

Keywords: Expectation theory of the term structure; Peso problem; Time varying term premium. (search for similar items in EconPapers)
JEL-codes: C22 E43 E52 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... g-paper_143_2006.pdf (application/pdf)

Related works:
Journal Article: Term structure anomalies: Term premium or peso-problem? (2008)
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:bfr:banfra:143

Access Statistics for this paper

More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().