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Testing the Expectations Hypothesis in the Brazilian Term Structure of Interest Rates

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Author Info

  • Benjamin Miranda Tabak
  • Sandro Canesso de Andrade

Abstract

In this paper the Expectations Hypothesis (EH) is tested using cointegration techniques, for maturities ranging from 1-month to 12-months, for the Brazilian market. We found evidence suggesting that for the period 1995-2001, the cointegration implication generally seems to hold. We also found strong evidence supporting causality from short to long rates and also in the opposite direction. Empirical evidence supports the expectations theory of the term structure of interest rates. However, when using multivariate cointegration tests we reject the unbiasedness hypothesis implied in the pure EH.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps30.pdf
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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 30.

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Date of creation: Nov 2001
Date of revision:
Publication status: Published in Revista Brasileira de Finanças, Vol. 1, no. 1, (2003).
Handle: RePEc:bcb:wpaper:30

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Web page: http://www.bcb.gov.br/?english

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Cited by:
  1. Rodrigo Cabral & Richard Munclinger & Luiz Alves & Marco Rodriguez Waldo, 2011. "On Brazil’s Term Structure: Stylized Facts and Analysis of Macroeconomic Interactions," IMF Working Papers 11/113, International Monetary Fund.
  2. 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.
  3. Marçal, Emerson Fernandes & Valls Pereira, Pedro L., 2012. "Evaluating the existence of structural change in the brazilian term structure of interest : evidence based on cointegration models with structural break," Textos para discussão 314, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  4. Júlio Cesar Albuquerque Bastos & Gabriel Caldas Montes, 2011. "Metasde Inflação E Estrutura A Termo Das Taxas De Juros - Uma Análise Dainfluência Da Credibilidade Sobre O Spread Da Taxa De Juros De Longoprazo No Brasil," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting] 142, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

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