Inflation, Endogenous Market Segmentation and the Term Structure of Interest Rates
Casper De Vries,
Xuedong Wang and
de Vries Casper G
Authors registered in the RePEc Author Service: Casper G. de Vries
No 5421, CESifo Working Paper Series from CESifo
Abstract:
The term structure of interest rates does not adhere to the expectations hypothesis, possibly due to a risk premium. We consider the implications of a risk premium that arises from endogenous market segmentation driven by variable inflation rates. In the absence of autocorrelation in inflation, the risk premium is constant. If inflation is correlated, however, the risk premium becomes time varying and we can rationalize the failure of the expectations hypothesis. Indirect empirical tests of the model’s implications are provided.
Keywords: expectations hypothesis; term structure; time-varying risk premia; segmented markets; inflation (search for similar items in EconPapers)
JEL-codes: E43 G12 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp5421.pdf (application/pdf)
Related works:
Working Paper: Inflation, Endogenous Market Segmentation and the Term Structure of Interest Rates (2015) 
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:ces:ceswps:_5421
Access Statistics for this paper
More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().