THE INFORMATION IN SWEDISH SHORT-MATURITY FORWARD RATES

In this paper we empirically study the relationship between implicit f orward rates and corresponding interest rates in the short-end of the Swedish term structure. The interest rates and forward rates seem to b e integrated of order one and cointegrated. We find that the forward r ates, for all maturities, contain information about future interest ra tes. Further, in contrast to previous empirical studies we cannot reje ct the joint hypothesis of rational expectations and no term premium. However, the results should be treated with caution since we also find parameter instability.