Estimating The Term Structure of Interest Rates: The Swiss Case

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Estimating The Term Structure of Interest Rates: The Swiss Case

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Iwan Meier

Abstract

Parametric estimation approaches are widely by central banks as they produce smooth term structures with relatively few parameters. In the paper I implement the Nelson and Siegel (1987) model for Switzerland. The estimations use daily observations of Swiss government bonds from January 1994 to July 1998. To overcome the lack of sufficient data in the very short run, the 1-month and 1-year Euromarket rate are added. The knowledge of the dependencies of the term structure from the possible parameter constellations is used to calibrate the model for the Swiss market. The results show that the parameters are stable over time. The smooth shape and the stability over time make it a valuable tool for monetary policy.

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Paper provided by Swiss National Bank, Study Center Gerzensee in its series Working Papers with number 99.06.

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Length: 28 pages
Date of creation: Dec 1999
Date of revision:
Handle: RePEc:szg:worpap:9906

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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

This paper has been announced in the following NEP Reports:

NEP-ALL-2000-08-26 (All new papers)
NEP-FMK-2000-08-26 (Financial Markets)
NEP-MON-2000-08-26 (Monetary Economics)

Cited by:
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Andraž, Grum, 2006. "Razvitost slovenskega trga dolžniškega kapitala in ocenitev krivulje donosnosti
[The development of the Slovenian government debt market and estimation of the yiled curve]," MPRA Paper 4876, University Library of Munich, Germany. [Downloadable!]
Petra Gerlach-Kristen, 2007. "Three aspects of the Swiss term structure: an empirical survey," Financial Markets and Portfolio Management, Springer, vol. 21(2), pages 221-240, June. [Downloadable!] (restricted)

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