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Revisiting the expectations hypothesis: The Japanese term structure and regime shifts

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  • Zhu, Xiaoneng
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    Abstract

    This paper re-examines the expectations hypothesis of the Japanese term structure along two dimensions: (a) allowing regime shifts in interest rate dynamics; (b) introducing macroeconomic factors as conditioning information. The empirical analysis suggests that the expectations hypothesis is an inadequate description of the Japanese term structure even after taking account of regime shifts. However, I find that regime shift is a salient feature of the Japanese term structure and regimes are intimately related to economic activities.

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    File URL: http://www.sciencedirect.com/science/article/B6V7T-521NWC4-1/2/02de58400b6a452c4987934e48c961a3
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economics and Business.

    Volume (Year): 63 (2011)
    Issue (Month): 3 (May)
    Pages: 237-249

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    Handle: RePEc:eee:jebusi:v:63:y:2011:i:3:p:237-249

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    Web page: http://www.elsevier.com/locate/jeconbus

    Related research

    Keywords: Expectations hypothesis Macro factors Regime shifts Term structure The Wald test;

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