The role of Regime Shifts in the Term Structure of Interest Rates: Further evidence from an Emerging Market
AbstractIn this paper, we investigate the interrelations among Turkish interest rates with different maturities by using a regime switching Vector Error Correction (VECM) model. We find a long run equilibrium relationship among interest rates with various maturities. Furthermore we conclude that term structure dynamics exhibit significant nonlinearity. Forecasting experiment also reveals that the nonlinear term structure models do fare better than other linear specifications. However, we cannot conclude that interest rate adjustments are made in an asymmetric way in the long run equilibrium.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 18741.
Date of creation: 2009
Date of revision:
Term Structure of Interest Rates; Regime Switching; Forecasting; Foreacast Evaluation; Cointegration;
Other versions of this item:
- Burak Saltoglu & M. Ege Yazgan, 2012. "The Role of Regime Shifts in the Term Structure of Interest Rates: Further Evidence from an Emerging Market," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 48(S5), pages 48-63, November.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-27 (All new papers)
- NEP-ARA-2009-11-27 (MENA - Middle East & North Africa)
- NEP-FOR-2009-11-27 (Forecasting)
- NEP-MON-2009-11-27 (Monetary Economics)
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