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Testing the expectations theory of the term structure for New Zealand

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  • Graeme Guthrie
  • Julian Wright
  • Jun Yu

Abstract

This paper tests the rational expectations theory of the term structure using recent daily, weekly, and monthly observations on New Zealand interest rates. We find that for many maturities we cannot reject the expectations hypothesis using both short and long versions of the theory. These results are interpreted as further evidence that the failure of the expectations hypothesis in the United States is due to the specific interest rate smoothing behaviour of the Federal Reserve.

Suggested Citation

  • Graeme Guthrie & Julian Wright & Jun Yu, 1999. "Testing the expectations theory of the term structure for New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 33(1), pages 93-114.
  • Handle: RePEc:taf:nzecpp:v:33:y:1999:i:1:p:93-114
    DOI: 10.1080/00779959909544299
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    Cited by:

    1. Long H. Vo, 2014. "Application of Kalman Filter on modelling interest rates," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(1), pages 1-15, March.
    2. Sinelnikova-Muryleva, Elena, 2017. "Analysis of Transmission Mechanisms of Monetary Policy of the Bank of Russia in Conditions of Transition to Inflation Targeting," Working Papers 041703, Russian Presidential Academy of National Economy and Public Administration.
    3. Leo Krippner, 2002. "Extracting expectations of New Zealand's Official Cash Rate from the bank-risk yield curve," Reserve Bank of New Zealand Discussion Paper Series DP2002/01, Reserve Bank of New Zealand.
    4. Siklos, Pierre L, 2000. "Inflation Targets and the Yield Curve: New Zealand and Australia versus the US," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(1), pages 15-32, February.
    5. Stephen Keef & Melvin Roush, 2004. "Day-of-the-week effects: New Zealand bank bills, 1985-2000," Applied Financial Economics, Taylor & Francis Journals, vol. 14(12), pages 859-873.
    6. Michael Gordon, 2003. "Estimates of time-varying term premia for New Zealand and Australia," Reserve Bank of New Zealand Discussion Paper Series DP2003/06, Reserve Bank of New Zealand.

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