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Switching regime models in the Spanish inter-bank market

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  • Arielle Beyaert
  • Juan rez-Castej

Abstract

Nonlinear present value models are adjusted to data from the Spanish inter-bank market between 1986 and 1992, with the ultimate objective of testing the rational expectations hypothesis of the term structure of the interest rates. The nonlinearity stems from using models with two stochastically switching regimes. The models are submitted to various specification tests and are compared with linear present value models. Very clearly differentiated regimes are identified, the analysis of the results in the light of the institutional, political and economic events that affected the Spanish economy during the period of study demonstrates the usefulness of this type of models. The expectation hypothesis is, however, rejected.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

Volume (Year): 6 (2000)
Issue (Month): 2 ()
Pages: 93-112

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Handle: RePEc:taf:eurjfi:v:6:y:2000:i:2:p:93-112

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Related research

Keywords: Interest Rates Term Structure Markov Process Switching Regimes Rational Expectations Nonlinearity;

References

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Citations

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Cited by:
  1. Osmani T. Guillen & Benjamin M. Tabak, 2008. "Characterizing the Brazilian Term Structure of Interest Rates," Working Papers Series 158, Central Bank of Brazil, Research Department.
  2. Arielle Beyaert & Juan Jose Perez-Castejon, 2009. "Markov-switching models, rational expectations and the term structure of interest rates," Applied Economics, Taylor & Francis Journals, vol. 41(3), pages 399-412.
  3. Beyaert, Arielle & Garcia-Solanes, Jose & Perez-Castejon, Juan J., 2007. "Uncovered interest parity with switching regimes," Economic Modelling, Elsevier, vol. 24(2), pages 189-202, March.

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