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
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.