The Term Structure of Interest Rates in the London Interbank Market
AbstractThe 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 InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 47 (1995)
Issue (Month): 3 (July)
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