Nonstationary term premia and cointegration of the term structure
AbstractThis paper proposes a model of the term structure with nonstationary term premia which exhibit a factor structure. This explains the common empirical finding of a cointegrating rank smaller than the one predicted by the rational expectations hypothesis of the term structure. An application to German interest rate data yields easily interpretable results.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 19944.
Date of creation: 2003
Date of revision:
Publication status: Published in Economics Letters 3 80(2003): pp. 409-413
Other versions of this item:
- Carstensen, Kai, 2003. "Nonstationary term premia and cointegration of the term structure," Economics Letters, Elsevier, vol. 80(3), pages 409-413, September.
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