Advanced Search
MyIDEAS: Login

A Convergence Model of the Term Structure of Interest Rates

Contents:

Author Info

  • Viktors Ajevskis
  • Kristine Vitola

Abstract

This paper develops a convergence model of the term structure of interest rates in the context of entering the EMU. Compared with the other models developed so far in this field, our model specification ensures convergence of the domestic short-term interest rates to the euro area ones. We achieve this convergence by stating that the spread between the domestic and euro short-term interest rates follows the Brownian bridge process. We also develop an econometric counterpart of the theoretical model. To address the problem of nonstationarity and nonlinearity of the model, the extended Kalman filter for coefficient estimation is applied.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bank.lv/public_files/images/img_lb/izdevumi/english/citas/wp_2009-1_ajevskis-vitola.pdf
Download Restriction: no

File URL: http://www.macroeconomics.lv/sites/default/files/wp_2009-1_ajevskis-vitola.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Latvijas Banka in its series Working Papers with number 2009/01.

as in new window
Length:
Date of creation: 09 Feb 2009
Date of revision:
Handle: RePEc:ltv:wpaper:200901

Contact details of provider:
Postal: K. Valdemara iela 2a, LV-1050 Riga
Phone: +371 702 2300
Fax: +371 702 2420
Email:
Web page: http://www.bank.lv/
More information through EDIRC

Related research

Keywords: term structure of interest rates; the Brownian bridge; the EMU; nonlinear Kalman filter;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. De Grauwe, Paul, 1996. "Forward Interest Rates as Predictors of EMU," CEPR Discussion Papers 1395, C.E.P.R. Discussion Papers.
  2. Favero, Carlo A & Giavazzi, Francesco & Iacone, Fabrizio & Tabellini, Guido, 1997. "Extracting Information from Asset Prices: The Methodology of EMU Calculators," CEPR Discussion Papers 1676, C.E.P.R. Discussion Papers.
  3. Vasicek, Oldrich Alfonso, 1977. "Abstract: An Equilibrium Characterization of the Term Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 627-627, November.
  4. David S. Bates, 1999. "Financial Markets' Assessment of EMU," NBER Working Papers 6874, National Bureau of Economic Research, Inc.
  5. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ltv:wpaper:200901. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ivars Tillers).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.