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Persistence and Cyclical Dependence in the Monthly Euribor Rate

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  • Guglielmo Maria Caporale
  • Luis A. Gil-Alana

Abstract

This paper analyses two well-known features of interest rates, namely their time dependence and their cyclical structure. Specifically, it focuses on the monthly Euribor rate, using monthly data from January 1994 to May 2011. Models based on fractional integration at the long run or zero frequency, although adequately describing the persistent behaviour of the series, do not take into account its cyclical structure. Therefore, a more general cyclical fractional model is considered. Future directions for research in this context are also discussed.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-11/cesifo1_wp3653.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3653.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3653

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Keywords: Euribor rate; time dependence; cyclical behaviour;

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  1. Campbell, John & Shiller, Robert, 1987. "Cointegration and Tests of Present Value Models," Scholarly Articles 3122490, Harvard University Department of Economics.
  2. Ignacio N Lobato & Carlos Velasco, 2007. "Efficient Wald Tests for Fractional Unit Roots," Econometrica, Econometric Society, vol. 75(2), pages 575-589, 03.
  3. Tsay, Wen-Jen, 2000. "Long memory story of the real interest rate," Economics Letters, Elsevier, vol. 67(3), pages 325-330, June.
  4. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March.
  5. Violetta Dalla & Javier Hidalgo, 2005. "A Parametric Bootstrap Test for Cycles," STICERD - Econometrics Paper Series /2005/486, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Jefferis, Richard H, Jr, 1993. "Long-Memory Inflation Uncertainty: Evidence from the Term Structure of Interest Rates: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 701-08, August.
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  8. Lai, Kon S, 1997. "Long-Term Persistence in the Real Interest Rate: Some Evidence of a Fractional Unit Root," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(3), pages 225-35, July.
  9. Gil-Alana, Luis A., 2004. "Long memory in the U.S. interest rate," International Review of Financial Analysis, Elsevier, vol. 13(3), pages 265-276.
  10. Hassler, Uwe & Wolters, Jurgen, 1994. "On the power of unit root tests against fractional alternatives," Economics Letters, Elsevier, vol. 45(1), pages 1-5, May.
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  12. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, October.
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  14. John T. Barkoulas & Christopher F. Baum, 1997. "Fractional Differencing Modeling And Forecasting Of Eurocurrency Deposit Rates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(3), pages 355-372, 09.
  15. Christina D. Romer, 1992. "Remeasuring Business Cycles," NBER Working Papers 4150, National Bureau of Economic Research, Inc.
  16. Shea, Gary S, 1991. "Uncertainty and Implied Variance Bounds in Long-Memory Models of the Interest Rate Term Structure," Empirical Economics, Springer, vol. 16(3), pages 287-312.
  17. Jeremy Couchman & Rukmani Gounder & Jen-Je Su, 2006. "Long memory properties of real interest rates for 16 countries," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(1), pages 25-30, January.
  18. Shiller, Robert J, 1979. "The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1190-1219, December.
  19. Chung, Ching-Fan, 1996. "Estimating a generalized long memory process," Journal of Econometrics, Elsevier, vol. 73(1), pages 237-259, July.
  20. Romer, Christina, 1986. "Spurious Volatility in Historical Unemployment Data," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 1-37, February.
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