Nonstationary term premia and cointegration of the term structure

Kai Carstensen

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This paper proposes a model of the term structure with nonstationary term premia which exhibit a factor structure. This explains the common empirical finding of a cointegrating rank smaller than the one predicted by the rational expectations hypothesis of the term structure. An application to German interest rate data yields easily interpretable results.

Date: 2003
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Citations: View citations in EconPapers (9)

Published in Economics Letters 3 80(2003): pp. 409-413

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Journal Article: Nonstationary term premia and cointegration of the term structure (2003)
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