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Co-integration and the term structure of Finnish short-term interest rates

Author

Listed:
  • Markku Lanne

    (University of Helsinki)

Abstract

The term structure of Finnish HELIBOR interest rates is studied by modelling it as a co-integrated system. There are three co-integrating vectors among the six rates. They can be identified as the spreads between the two and one and three and one month rates, and a third vector tending to keep the yield curve linear. Co-integration analysis of partial systems suggests that it is only for the three shortest-term yields that the expectations hypothesis cannot be rejected. Recursive analysis reveals that the co-integratioll space has changed in time, which is not surprising given the changes in monetary policy regimes.

Suggested Citation

  • Markku Lanne, 1995. "Co-integration and the term structure of Finnish short-term interest rates," Finnish Economic Papers, Finnish Economic Association, vol. 8(1), pages 3-16, Spring.
    • Handle: RePEc:fep:journl:v:8:y:1995:i:1:p:3-16
    as

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    References listed on IDEAS

    as
    1. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
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    4. Engsted, Tom & Tanggaard, Carsten, 1994. "Cointegration and the US term structure," Journal of Banking & Finance, Elsevier, vol. 18(1), pages 167-181, January.
    5. Shea, Gary S, 1991. "Uncertainty and Implied Variance Bounds in Long-Memory Models of the Interest Rate Term Structure," Empirical Economics, Springer, vol. 16(3), pages 287-312.
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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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