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Interest Rate Term Structure in Latvia in the Monetary Policy Context

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Listed author(s):
  • Jelena Zubkova

    (Bank of Latvia)

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    Abstract

    This paper examines applicability of various models of the yield curve construction to the Latvian money and government securities markets, and analyses the information content implied in the yield curve. The rejection of hypothesis about the existence of a zero risk premium leads to an inference that forward rates in general do not ensure unbiased forecasts of spot rates, and the pure interest rate expectations theory cannot be applied in interest rate forecasting. Long-term interest rates contain a risk premium that is other than zero. This conforms well with the results obtained from studies conducted on the financial markets of developed countries.

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    Paper provided by Latvijas Banka in its series Working Papers with number 2003/03.

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    Date of creation: 09 Dec 2003
    Handle: RePEc:ltv:wpaper:200303
    Contact details of provider: Postal:
    K. Valdemara iela 2a, LV-1050 Riga

    Phone: +371 702 2300
    Fax: +371 702 2420
    Web page: https://www.bank.lv/
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    Keywords: term structure of interest rates; risk premium; the Nelson–Siegel model;

    Find related papers by JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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