THE TERM STRUCTURE OF DANISH MONEY MARKET INTEREST-RATES

The term structure of Danish money market interest rates is analyzed f or the period 1983-1993. The spread between 3- and 1-month money marke t rates significantly predict future interest rate changes in the dire ction implied by the classical expectations hypothesis, especially in periods with high interest rate volatility. Furthermore, evidence is f ound of long run one-way causality from German interest rates to Danis h interest rates, which suggests that Danish monetary policy is domina ted by German monetary policy in the long run.