TESTING THE TERM STRUCTURE OF INTEREST-RATES USING A STATIONARY VECTOR AUTOREGRESSION WITH REGIME SWITCHING

Authors
Citation
M. Sola et J. Driffill, TESTING THE TERM STRUCTURE OF INTEREST-RATES USING A STATIONARY VECTOR AUTOREGRESSION WITH REGIME SWITCHING, Journal of economic dynamics & control, 18(3-4), 1994, pp. 601-628
Citations number
16
Categorie Soggetti
Economics
ISSN journal
01651889
Volume
18
Issue
3-4
Year of publication
1994
Pages
601 - 628
Database
ISI
SICI code
0165-1889(1994)18:3-4<601:TTTSOI>2.0.ZU;2-Q
Abstract
The expectations model of the term structure for US data on three- and six-month treasury bills for the period 1962(1)-1987(3) is explored. The analysis allows for the nonstationarity of the data, and for unobs erved stochastic switches of regime, by estimating VARs in the yield s pread and the change in the three-month rate which allow the time seri es processes to change between regimes. In contrast to other results f or the expectations model, such as those of Hamilton (1988), Mankiw an d Miron (1986), and others, we find that the data do not reject the mo del.