Nonstationary term premia and cointegration of the term structure
AbstractThis paper proposes a model of the term structure with nonstationary term premia which exhibit a factor structure. This explains the common empirical finding of a cointegrating rank smaller than the one predicted by the rational expectations hypothesis of the term structure. An application to German interest rate data yields easily interpretable results.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 80 (2003)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/ecolet
Other versions of this item:
- Carstensen, Kai, 2003. "Nonstationary term premia and cointegration of the term structure," Munich Reprints in Economics 19944, University of Munich, Department of Economics.
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