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Expectations and Behaviour of the Spanish Treasury Bill Rates Patterns in Neighboring Areas

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Listed author(s):
  • Vidal Fernadez Montoro

    (Department d’ Economia. Universitat Jaume I. Campus del Riu Sec. E-12080 Castell?n (Spain))

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    Abstract

    Rational Expectations models are tested here under the standard assumptions of the Expectations Hypothesis (EH) of interest rates. We examine the theoretical unbiasedness of the interest rates by predicting changes in the shorter spot rates. Unit root tests are applied and VAR systems are specified as a framework to apply Johansen’s Maximum Likelihood Cointegration Analysis. Homogeneity and exogeneity tests are also carried out. Finally, we provide some Vector Error Correction Models (VECM) to determine the significance of the main assertions of the EH. Our monetary transmission mechanism, the Spanish treasury bills played a very relevant role in the monetary policy applied in Spain in order to enter the EMU.

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    Article provided by Cyprus Economic Society and University of Cyprus in its journal Ekonomia.

    Volume (Year): 5 (2001)
    Issue (Month): 1 (Summer)
    Pages: 61-83

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    Handle: RePEc:ekn:ekonom:v:5:y:2001:i:1:p:61-83
    Contact details of provider: Web page: http://www.ekonomia.ucy.ac.cy/

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    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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    10. Hendry, David F, 1988. "The Encompassing Implications of Feedback versus Feedforward Mechanisms in Econometrics," Oxford Economic Papers, Oxford University Press, vol. 40(1), pages 132-149, March.
    11. Dominguez, Emilio & Novales, Alfonso, 2000. "Testing the expectations hypothesis in Eurodeposits," Journal of International Money and Finance, Elsevier, vol. 19(5), pages 713-736, October.
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    13. Javier Quesada Ibáñez & Francisco José Goerlich Gisbert & Joaquín Maudos Villarroya, 1994. "Interest rate, expectations and the credibility of the bank of Spain," Working Papers. Serie EC 1994-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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