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The term structure of interest rates with nonlinear adjustment: Evidence from a unit root test in the nonlinear STAR framework

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  • Daiki Maki

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    (Graduate School of Economics, Doshisha University)

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    Abstract

    This paper investigates the term structure of interest rates in Japan using the unit root test in a nonlinear STAR framework. The results provide strong evidence against the unit root of the yield spread between long-term and short-term interest rates, compared with standard unit root tests assuming only linear adjustment. This finding shows that the term structure of interest rates is stable with nonlinear adjustment.

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    File URL: http://www.accessecon.com/pubs/EB/2005/Volume3/EB-05C20005A.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 3 (2005)
    Issue (Month): 6 ()
    Pages: 1-7

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    Handle: RePEc:ebl:ecbull:eb-05c20005

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    1. John Y. Campbell, 1995. "Some Lessons from the Yield Curve," Harvard Institute of Economic Research Working Papers 1713, Harvard - Institute of Economic Research.
    2. Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-26, February.
    3. John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," Cowles Foundation Discussion Papers 785, Cowles Foundation for Research in Economics, Yale University.
    4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    5. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    6. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
    7. Anderson, Heather M, 1997. "Transaction Costs and Non-linear Adjustment towards Equilibrium in the US Treasury Bill Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 465-84, November.
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