A Non-parametric Approach to Model the Term Structure of Interest Rates: The Case of Chile

Viviana Fernandez

No 97, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile

Abstract: Numerous studies have resorted to parametric models to infer the shape of the term structure of interest rates. Recently, however, it has been shown that non-parametric techniques may be more adequate. This is an empirical study for Chile between December 1992 and April 1998. Monte Carlo simulations, based upon a non-parametric one-factor model, suggest that Chile’s downward-sloping term structure could be explained by the mean-reversion process in the data. The latter could reflect medium and long-term goals of monetary policy of the Central Bank of Chile. Some alternative explanations, such as that of the preferred habitats, might be also plausible.

Date: 2001
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Journal Article: A nonparametric approach to model the term structure of interest rates: The case of Chile (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:edj:ceauch:97

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