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

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  • Vidal Fernadez Montoro

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

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.

Suggested Citation

  • Vidal Fernadez Montoro, 2001. "Expectations and Behaviour of the Spanish Treasury Bill Rates Patterns in Neighboring Areas," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 5(1), pages 61-83, Summer.
    • Handle: RePEc:ekn:ekonom:v:5:y:2001:i:1:p:61-83
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    References listed on IDEAS

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    1. Peter C.B. Phillips & Sam Ouliaris & Joon Y. Park, 1988. "Testing for a Unit Root in the Presence of a Maintained Trend," Cowles Foundation Discussion Papers 880, Cowles Foundation for Research in Economics, Yale University.
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    JEL classification:

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

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