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The Expectations Hypothesis of the Term Structure - The Case of Ireland

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  • Keith Cuthbertson

    (Management School, Imperial College London)

  • Don Bredin

    (Central Bank of Ireland)

Abstract

Using a number of short-term maturities and monthly data, 1984-1997, we provide a number of tests of the expectations hypothesis (EH) of the term structure. The paper draws on cointegration techniques and the methodological approach of Campbell and Shiller (1987,1991). On balance our results lend support to the EH and are broadly consistent with recent findings for the UK, but are in sharp contrast to those for the US.

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File URL: http://www.esr.ie/vol31_3/5Cuthbert.pdf
File Function: First version, 2000
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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 31 (2000)
Issue (Month): 3 ()
Pages: 267-281

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Handle: RePEc:eso:journl:v:31:y:2000:i:3:p:267-281

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  1. repec:nbr:nberwo:2341 is not listed on IDEAS
  2. John Y. Campbell & Robert J. Shiller, 1989. "Yield Spreads and Interest Rate Movements: A Bird's Eye View," NBER Working Papers 3153, National Bureau of Economic Research, Inc.
  3. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-88, October.
  4. N. Gregory Mankiw & Jeffrey A. Miron, 1985. "The Changing Behavior of the Term Structure of Interest Rates," NBER Working Papers 1669, National Bureau of Economic Research, Inc.
  5. Geert Bekaert & Robert J. Hodrick & David Marshall, 1996. "On biases in tests of the expectations hypothesis of the term structure of interest rates," Working Paper Series, Issues in Financial Regulation WP-96-3, Federal Reserve Bank of Chicago.
  6. Kugler, Peter, 1988. "An Empirical Note on the Term Structure and Interest Rate Stabilization Policies," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 789-92, November.
  7. Taylor, Mark P, 1992. "Modelling the Yield Curve," Economic Journal, Royal Economic Society, vol. 102(412), pages 524-37, May.
  8. Martin D. Evans & Karen K. Lewis, 1992. "Do Stationary Risk Premia Explain It All? Evidence from the Term Structure," Working Papers 92-11, New York University, Leonard N. Stern School of Business, Department of Economics.
  9. McCulloch, J Huston, 1971. "Measuring the Term Structure of Interest Rates," The Journal of Business, University of Chicago Press, vol. 44(1), pages 19-31, January.
  10. Geert Bekaert & Robert J. Hodrick, 2000. "Expectations Hypotheses Tests," NBER Working Papers 7609, National Bureau of Economic Research, Inc.
  11. Melino, Angelo, 1988. " The Term Structure of Interest Rates: Evidence and Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 2(4), pages 335-66.
  12. Engsted, Tom, 1996. "The predictive power of the money market term structure," International Journal of Forecasting, Elsevier, vol. 12(2), pages 289-295, June.
  13. McCulloch, J Huston, 1975. "The Tax-Adjusted Yield Curve," Journal of Finance, American Finance Association, vol. 30(3), pages 811-30, June.
  14. Hurn, A Stan & Moody, Terry & Muscatelli, V Anton, 1995. "The Term Structure of Interest Rates in the London Interbank Market," Oxford Economic Papers, Oxford University Press, vol. 47(3), pages 419-36, July.
  15. Shea, Gary S, 1992. "Benchmarking the Expectations Hypothesis of the Interest-Rate Term Structure: An Analysis of Cointegration Vectors," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 347-66, July.
  16. Shea, Gary S., 1984. "Pitfalls in Smoothing Interest Rate Term Structure Data: Equilibrium Models and Spline Approximations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(03), pages 253-269, September.
  17. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
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Cited by:
  1. Bredin, Don, 2001. "Alternative Tests of the Expectations Hypothesis of the Term Structure of Interest Rates," Research Technical Papers 2/RT/01, Central Bank of Ireland.
  2. Don Bredin & Caroline Gavin & Gerard O Reilly, 2003. "The Influence of Domestic and International Interest Rates on the ISEQ," The Economic and Social Review, Economic and Social Studies, vol. 34(3), pages 249–265.
  3. Cuthbertson, Keith & Bredin, Don, 2001. "Risk Premia and Long Rates in Ireland," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(6), pages 391-403, September.
  4. Minoas Koukouritakis, 2010. "Structural breaks and the expectations hypothesis of the term structure: evidence from Central European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(4), pages 757-774, January.
  5. Angélica Arosemena, . "Lecturas Alternativas de la Estructura a Plazo: Una Breve Revisión de literatura," Borradores de Economia 223, Banco de la Republica de Colombia.

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