IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The Role of Regime Shifts in the Term Structure of Interest Rates: Further Evidence from an Emerging Market

  • Burak Saltoglu
  • M. Ege Yazgan

In this paper, we investigate the interrelationships among Turkish interest rates having different maturities by using a regime-switching vector error correction model. We find a relationship of long-run equilibrium among interest rates having various maturities. Furthermore, we conclude that term structure dynamics exhibit significant nonlinearity. A forecasting experiment also reveals that the nonlinear term structure models fare better in forecasting than other linear specifications. However, we cannot conclude that interest rate adjustments are made in an asymmetric way in the long run.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=C211668V0L746455
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 48 (2012)
Issue (Month): S5 (November)
Pages: 48-63

as
in new window

Handle: RePEc:mes:emfitr:v:48:y:2012:i:s5:p:48-63
Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Shiller, Robert & Campbell, John, 1991. "Yield Spreads and Interest Rate Movements: A Bird's Eye View," Scholarly Articles 3221490, Harvard University Department of Economics.
  2. Johansen, S., 1999. "A Bartlett Correction Factor for Tests on the Cointegrating Relations," Economics Working Papers eco99/10, European University Institute.
  3. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  4. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  5. Telatar, Erdinc & Telatar, Funda & Ratti, Ronald A., 2003. "On the predictive power of the term structure of interest rates for future inflation changes in the presence of political instability: the Turkish economy," Journal of Policy Modeling, Elsevier, vol. 25(9), pages 931-946, December.
  6. Osmani Teixeira De Carvalho Guillen & Benjamin M. Tabak, 2009. "Characterising the Brazilian term structure of interest rates," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 2(2), pages 103-114.
  7. Halbert White, 2000. "A Reality Check for Data Snooping," Econometrica, Econometric Society, vol. 68(5), pages 1097-1126, September.
  8. Soren Johansen, 2002. "A Small Sample Correction for the Test of Cointegrating Rank in the Vector Autoregressive Model," Econometrica, Econometric Society, vol. 70(5), pages 1929-1961, September.
  9. Masao Ogaki & Julio Santaella, 1999. "The Exchange Rate and the Term Structure of Interest Rates in Mexico," Working Papers 99-21, Ohio State University, Department of Economics.
  10. Giorgio Valente & Lucio Sarno, 2004. "Empirical Exchange Rate Models and Currency Risk: Some Evidence from Density Forecasts," Working Papers wp04-10, Warwick Business School, Finance Group.
  11. Francis X. Diebold & Canlin Li, 2002. "Forecasting the Term Structure of Government Bond Yields," Center for Financial Institutions Working Papers 02-34, Wharton School Center for Financial Institutions, University of Pennsylvania.
  12. Jens H. E. Christensen & Francis X. Diebold & Glenn D. Rudebusch, 2007. "The Affine Arbitrage-Free Class of: Nelson-Siegel Term Structure Models," NBER Working Papers 13611, National Bureau of Economic Research, Inc.
  13. Clarida, Richard & Sarno, Lucio & Taylor, Mark P & Valente, Giorgio, 2002. "The Out-of-Sample Success of Term Structure Models as Exchange Rate Predictors: A Step Beyond," CEPR Discussion Papers 3281, C.E.P.R. Discussion Papers.
  14. Hans-Martin Krolzig & Massimiliano Marcellino & Grayham E. Mizon, . "A Markov-Switching Vector Equilibrium Correction Model of the UK Labour Market," Working Papers 185, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  15. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
  16. Lütkepohl, Helmut & Saikkonen, Pentti & Trenkler, Carsten, 2000. "Maximum eigenvalue versus trace tests for the cointegrating rank of a VAR process," SFB 373 Discussion Papers 2000,83, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  17. Drakos, Konstantinos, 2001. "Monetary policy and the yield curve in an emerging market: the Greek case," Emerging Markets Review, Elsevier, vol. 2(3), pages 244-262, September.
  18. Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-99, October.
  19. Diebold, Francis X. & Li, Canlin & Yue, Vivian Z., 2007. "Global yield curve dynamics and interactions: A dynamic Nelson-Siegel approach," CFS Working Paper Series 2008/27, Center for Financial Studies (CFS).
  20. Juan Carlos Cuestas & Barry Harrison, 2010. "Further Evidence on the Real Interest Rate Parity Hypothesis in Central and East European Countries: Unit Roots and Nonlinearities," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(6), pages 22-39, November.
  21. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-89, October.
  22. West, Kenneth D, 1996. "Asymptotic Inference about Predictive Ability," Econometrica, Econometric Society, vol. 64(5), pages 1067-84, September.
  23. Clarida, Richard & Sarno, Lucio & Taylor, Mark P & Valente, Giorgio, 2005. "The Role of Asymmetries and Regime Shifts in the Term Structure of Interest Rates," CEPR Discussion Papers 4835, C.E.P.R. Discussion Papers.
  24. 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 116-26, February.
  25. Hubert Gabrisch & Lucjan T. Orlowski, 2010. "Interest Rate Convergence in Euro-Candidate Countries: Volatility Dynamics of Sovereign Bond Yields," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(6), pages 69-85, November.
  26. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  27. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  28. Yilmazkuday, Hakan & Akay, Koray, 2008. "An analysis of regime shifts in the Turkish economy," Economic Modelling, Elsevier, vol. 25(5), pages 885-898, September.
  29. C. Emre Alper & K. Kazimov & A. Akdemir, 2007. "Forecasting the term structure of interest rates for Turkey: a factor analysis approach," Applied Financial Economics, Taylor & Francis Journals, vol. 17(1), pages 77-85.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:48:y:2012:i:s5:p:48-63. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Nguyen)

The email address of this maintainer does not seem to be valid anymore. Please ask Chris Nguyen to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.