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The Information Content of the French and German Government Bond Tield Curves: Why Such Differences?

  • Jondeau, E.
  • Ricart, R.

In this paper, we evaluate the information content of the yield curve as regards future interest rates and inflation in France and Germany. An original data set of long-term zero-coupon interest rates for French and German government bonds was constructed for the period 1980-97. Empirical evidence shows that the German yield curve has a significant information content about the future average change in short-term rates and the future path of inflation. The information content of the French yield curve is much more limited and is only relevant for the average change in short-term rates. We show that the difference between the results obtained for both countries mainly stems from lower variability in German risk premia than in French risk premia.

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Paper provided by Banque de France in its series Working papers with number 61.

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Length: 33 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:bfr:banfra:61
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/

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  1. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
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  9. John Y. Campbell, 1995. "Some Lessons from the Yield Curve," Harvard Institute of Economic Research Working Papers 1713, Harvard - Institute of Economic Research.
  10. Gerlach, Stefan, 1995. "The Information Content of the Term Structure: Evidence for Germany," CEPR Discussion Papers 1264, C.E.P.R. Discussion Papers.
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  14. Jondeau, E. & Ricart, R., 1996. "The Expectation Theory: Tests on French, German, and American Euro-Rates," Working papers 35, Banque de France.
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  18. Mishkin, Frederic S., 1991. "A multi-country study of the information in the shorter maturity term structure about future inflation," Journal of International Money and Finance, Elsevier, vol. 10(1), pages 2-22, March.
  19. Frederic S. Mishkin, 1989. "A Multi-Country Study of the Information in the Term Structure about Future Inflation," NBER Working Papers 3125, National Bureau of Economic Research, Inc.
  20. Stefan Gerlach, 1996. "Monetary policy and the behaviour of interest rates: are long rates excessively volatile?," BIS Working Papers 34, Bank for International Settlements.
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  25. Frank Browne & Paolo Manasse, 1989. "The Information Content of the Term Structure of Interest Rates: Theory and Practice," OECD Economics Department Working Papers 69, OECD Publishing.
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