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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
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    References listed on IDEAS

    as
    1. Henrik Hansen & Søren Johansen, 1992. "Recursive Estimation in Cointegrated VAR-Models," Discussion Papers 92-13, University of Copenhagen. Department of Economics.
    2. Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-126, February.
    3. Engsted, Tom & Tanggaard, Carsten, 1994. "Cointegration and the US term structure," Journal of Banking & Finance, Elsevier, vol. 18(1), pages 167-181, January.
    Full references (including those not matched with items on IDEAS)

    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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