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Switching regime models in the Spanish inter-bank market

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Listed author(s):
  • Arielle Beyaert
  • Juan rez-Castej

Abstract

Nonlinear present value models are adjusted to data from the Spanish inter-bank market between 1986 and 1992, with the ultimate objective of testing the rational expectations hypothesis of the term structure of the interest rates. The nonlinearity stems from using models with two stochastically switching regimes. The models are submitted to various specification tests and are compared with linear present value models. Very clearly differentiated regimes are identified, the analysis of the results in the light of the institutional, political and economic events that affected the Spanish economy during the period of study demonstrates the usefulness of this type of models. The expectation hypothesis is, however, rejected.

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Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

Volume (Year): 6 (2000)
Issue (Month): 2 ()
Pages: 93-112

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Handle: RePEc:taf:eurjfi:v:6:y:2000:i:2:p:93-112
DOI: 10.1080/13518470050020789
Contact details of provider: Web page: http://www.tandfonline.com/REJF20

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Keywords: Interest Rates Term Structure Markov Process Switching Regimes Rational Expectations Nonlinearity;

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Cited by:

  1. Arielle Beyaert & Juan Jose Perez-Castejon, 2009. "Markov-switching models, rational expectations and the term structure of interest rates," Applied Economics, Taylor & Francis Journals, vol. 41(3), pages 399-412.
  2. 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.
  3. Beyaert, Arielle & Garcia-Solanes, Jose & Perez-Castejon, Juan J., 2007. "Uncovered interest parity with switching regimes," Economic Modelling, Elsevier, vol. 24(2), pages 189-202, March.

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