The changing behaviour of the term structure of post-war US.

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The changing behaviour of the term structure of post-war US.

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Mª Jose Gutierrez () (Universidad del País Vasco)
Jesús Vazquez () (Universidad del País Vasco)

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Abstract

Using U.S. interest rate data covering the period 1950:1-1992:7, this paper tests the rational expectations model of the term structure of interest rates. We show evidence that the rational expectations model of the term structure is supported by the data during the seventies and a period lasting from the mid-eighties to the end of the sample. However, during the …fties, sixties and a period that covers most of the Volcker’s office term (from September 1979 to April 1986) the term structure model is rejected by the data. Moreover, wefind evidence of regime changes in the short-term rate process and the term structure of interest rates. These regime switches roughly coincide with changes in the Federal Reserve chairman. The switches in monetary policy taking place when the chairmanship of the Federal Reserve changes therefore seem to play an important role in characterizing the term structure of interest rates.

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Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 200225.

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Date of creation: 24 Sep 2003
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Handle: RePEc:ehu:dfaeii:200225

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Postal: Dpto. de Fundamentos del Análisis Económico II, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates

Cited by:
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Peter Tillmann, 2003. "Cointegration and Regime-Switching Risk Premia in the U.S. Term Structure of Interest Rates," Bonn Econ Discussion Papers bgse27_2003, University of Bonn, Germany. [Downloadable!]
Other versions:
- Peter Tillmann, 2004. "Cointegration and Regime-Switching Risk Premia in the US Term Structure of Interest Rates," Econometric Society 2004 North American Summer Meetings 26, Econometric Society. [Downloadable!]

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