On the Term Structure of Interest Rates of the Mexican Government
AbstractThis paper, first, reviews briefly the literature on the term structure of interest rates, citing some of the most important studies done on the topic for the Mexican case in the last years. In addition, the development of the government debt market is described. Second, evidence against the expectation hypothesis is shown and the deviations of the term structure from this hypothesis are examined. Third, it is documented that much of the variability of the term structure is due to changes in its level. Fourth, some of the statistics of the term structure are associated with macroeconomic variables, specifically the short-term rate and the output gap as measured with the IGAE index. Regarding this last point, evidence is found that changes in the term structure of interest rates’ slope are associated with the monetary policy stand along the business cycle. The nominal interest rates used in the analysis go from July 2002 to June 2011.
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Bibliographic InfoPaper provided by Banco de México in its series Working Papers with number 2011-18.
Date of creation: Dec 2011
Date of revision:
Term Structure of Interest Rates; Expectation Hypothesis; Principal Component Analysis; Nominal Interest Rates.;
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-03 (All new papers)
- NEP-HIS-2012-01-03 (Business, Economic & Financial History)
- NEP-MAC-2012-01-03 (Macroeconomics)
- NEP-MON-2012-01-03 (Monetary Economics)
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