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The Structure of Real Interest Rates in Chile

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  • Fernando Lefort G.
  • Eduardo Walker H.

Abstract

This paper describes the structure of real interest rates (the real yield curve) in Chile and shows its evolution through time. It provides a practical tool for the systematic study of the determinants of Chilean yield curves. Empirical estimations are based on transaction and auction data for Central Bank bonds and pension recognition bonds issued by the government, applying the Nelson and Siegel method. Estimation results are used to measure the liquidity premium in the market maker’s bond yield, simulate the evolution of the very short and long-term rates, and analyze issues of Central Bank zero-coupon bonds and the response of domestic interest rates to local and international economic events.

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File URL: http://www.bcentral.cl/estudios/revista-economia/2000/ago2000/rec_v3n2_pp31_52.pdf
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Bibliographic Info

Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 3 (2000)
Issue (Month): 2 (August)
Pages: 31-52

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Handle: RePEc:chb:bcchec:v:3:y:2000:i:2:p:31-52

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  1. Barry Cozier & Greg Tkacz, . "The Term Structure and Real Activity in Canada," Working Papers, Bank of Canada 94-3, Bank of Canada.
  2. Roma, Antonio & Torous, Walter, 1997. " The Cyclical Behavior of Interest Rates," Journal of Finance, American Finance Association, American Finance Association, vol. 52(4), pages 1519-42, September.
  3. Bekaert, Geert & Hodrick, Robert J. & Marshall, David A., 2001. "Peso problem explanations for term structure anomalies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(2), pages 241-270, October.
  4. Svensson, L.E.O., 1994. "Estimating and Interpreting Foreward Interest Rates: Sweden 1992-1994," Papers, Stockholm - International Economic Studies 579, Stockholm - International Economic Studies.
  5. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(2), pages 177-188, November.
  6. Jim Day & Ron Lange, 1997. "The Structure of Interest Rates in Canada: Information Content about Medium-Term Inflation," Working Papers, Bank of Canada 97-10, Bank of Canada.
  7. Arturo Estrella & Gikas A. Hardouvelis, 1989. "The term structure as a predictor of real economic activity," Research Paper, Federal Reserve Bank of New York 8907, Federal Reserve Bank of New York.
  8. Lars E.O. Svensson, 1994. "Monetary Policy with Flexible Exchange Rates and Forward Interest Rates as Indicators," NBER Working Papers 4633, National Bureau of Economic Research, Inc.
  9. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, Econometric Society, vol. 53(2), pages 385-407, March.
  10. Svensson, Lars E O, 1994. "Estimating and Interpreting Forward Interest Rates: Sweden 1992-4," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1051, C.E.P.R. Discussion Papers.
  11. Lars E. O. Svensson, 1994. "Estimating and Interpreting Forward Interest Rates," IMF Working Papers 94/114, International Monetary Fund.
  12. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 60(4), pages 473-89, October.
  13. Kamara, Avraham, 1997. " The Relation between Default-Free Interest Rates and Expected Economic Growth Is Stronger Than You Think," Journal of Finance, American Finance Association, American Finance Association, vol. 52(4), pages 1681-94, September.
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