Long memory models of interest rates, the term structure, and variance bounds tests
AbstractVariance bounds tests of the rational expectations hypothesis of the interest rate term structure are sensitive to the stochastic characterization of short-term interest rates used. When a long memory or fractional difference nonstationary time series model is used in preference to a mean stationary model, the rational expectations hypothesis is not rejected. Long memory models of interest rates are estimated and tested against alternatives. Their forecasting properties are also examined. Hypothesis tests are based upon bootstrapping (Monte Carlo) methodologies.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 258.
Date of creation: 1985
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