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The Term Structure of Interest Rates in the London Interbank Market

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Author Info

  • Hurn, A Stan
  • Moody, Terry
  • Muscatelli, V Anton

Abstract

The authors test the conjecture that the highly competitive nature of the London interbank market will result in longer-term rates determined primarily by expectations of future short-term rates. In so doing, the authors employ both cointegration tests and the vector autoregressive approach proposed by J. Y. Campbell and R. J. Shiller. Their results are generally supportive of the expectations hypothesis and, in contrast to all previous studies which have employed the vector autoregressive approach, the authors cannot reject the restrictions implied by the expectations hypothesis. The only indication of marginal deviations from the expectations hypothesis may be found at the very short end of the interbank spectrum. Copyright 1995 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 47 (1995)
Issue (Month): 3 (July)
Pages: 419-36

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Handle: RePEc:oup:oxecpp:v:47:y:1995:i:3:p:419-36

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Cited by:
  1. Silva Lopes, Artur C. & Monteiro, Olga Susana, 2007. "The Expectations Hypothesis of the Term Structure: Some Empirical Evidence for Portugal," MPRA Paper 6310, University Library of Munich, Germany, revised 14 Dec 2007.
  2. Bredin, Don & Cuthbertson, Keith, 2000. "The Expectations Hypothesis of the Term Structure: The Case of Ireland," Research Technical Papers 1/RT/00, Central Bank of Ireland.
  3. Jondeau, E. & Sedillot, F., 1998. "La prevision des taux longs français et allemands a partir d'un modele a anticipations rationnelles," Working papers 55, Banque de France.
  4. 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.
  5. Olga Susana M. Monteiro & Artur C. B. da Silva Lopes, 2010. "Short- and Long-Run Tests of the Expectations Hypothesis: The Portuguese Case," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(3), pages 257-280.
  6. Cuthbertson, Keith & Hayes, Simon & Nitzsche, Dirk, 2000. "Are German money market rates well behaved?," Journal of Economic Dynamics and Control, Elsevier, vol. 24(3), pages 347-360, March.
  7. Brooks, Chris & Rew, Alistair G., 2002. "Testing for non-stationarity and cointegration allowing for the possibility of a structural break: an application to EuroSterling interest rates," Economic Modelling, Elsevier, vol. 19(1), pages 65-90, January.
  8. Jelena Zubkova, 2003. "Interest Rate Term Structure in Latvia in the Monetary Policy Context," Working Papers 2003/03, Latvijas Banka.
  9. S. Lardic & V. Mignon, 2002. "Fractional cointegration and term structure of interest rates," THEMA Working Papers 2002-28, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  10. Jondeau, Eric & Ricart, Roland, 1999. "The expectations hypothesis of the term structure: tests on US, German, French, and UK Euro-rates," Journal of International Money and Finance, Elsevier, vol. 18(5), pages 725-750, October.

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