The Role of Regime Shifts in the Term Structure of Interest Rates: Further Evidence from an Emerging Market
AbstractIn this paper, we investigate the interrelationships among Turkish interest rates having different maturities by using a regime-switching vector error correction model. We find a relationship of long-run equilibrium among interest rates having various maturities. Furthermore, we conclude that term structure dynamics exhibit significant nonlinearity. A forecasting experiment also reveals that the nonlinear term structure models fare better in forecasting than other linear specifications. However, we cannot conclude that interest rate adjustments are made in an asymmetric way in the long run.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.
Volume (Year): 48 (2012)
Issue (Month): S5 (November)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024
cointegration; forecast evaluation; forecasting; regime switching; term structure of interest rates;
Other versions of this item:
- Saltoglu, Burak & Yazgan, Ege, 2009. "The role of Regime Shifts in the Term Structure of Interest Rates: Further evidence from an Emerging Market," MPRA Paper 18741, University Library of Munich, Germany.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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