The expectations hypothesis and decoupling of short- and long-term US interest rates: A pairwise approach

Mark J. Holmes, Jesús Otero, Theodore Panagiotidis

Resultado de la investigación: Contribución a RevistaArtículo

1 Cita (Scopus)

Resumen

© 2015 Elsevier Inc.The link between short-term policy rates and long-term rates elucidate the potential effectiveness of monetary policy. We examine the US term structure of interest rates using a pairwise econometric approach advocated by Pesaran (2007). Our empirical modelling strategy employs a probabilistic test statistic for the expectations hypothesis of the term structure based on the percentage of unit root rejections among all interest rate differentials. We find support for the expectations hypothesis and provide new insights into the nature of interest rate decoupling which are of value to policymakers. The maturity gap associated with interest rate pairs negatively impacts on the probability of stationarity, and also on the speed of adjustment towards long-run equilibrium. We further show that the speed of adjustment has become more sensitive to the maturity gap over time.
Idioma originalEnglish (US)
Páginas (desde-hasta)301-313
Número de páginas13
PublicaciónNorth American Journal of Economics and Finance
DOI
EstadoPublished - nov 1 2015

Huella dactilar

Expectations hypothesis
Decoupling
Interest rates
Maturity
Speed of adjustment
Empirical modeling
Long-run equilibrium
Interest rate differentials
Stationarity
Unit root
Monetary policy
Test statistic
Term structure
Politicians
Econometrics
Term structure of interest rates

Citar esto

@article{2cac1145269e4debbdbed0e81908f7da,
title = "The expectations hypothesis and decoupling of short- and long-term US interest rates: A pairwise approach",
abstract = "{\circledC} 2015 Elsevier Inc.The link between short-term policy rates and long-term rates elucidate the potential effectiveness of monetary policy. We examine the US term structure of interest rates using a pairwise econometric approach advocated by Pesaran (2007). Our empirical modelling strategy employs a probabilistic test statistic for the expectations hypothesis of the term structure based on the percentage of unit root rejections among all interest rate differentials. We find support for the expectations hypothesis and provide new insights into the nature of interest rate decoupling which are of value to policymakers. The maturity gap associated with interest rate pairs negatively impacts on the probability of stationarity, and also on the speed of adjustment towards long-run equilibrium. We further show that the speed of adjustment has become more sensitive to the maturity gap over time.",
author = "Holmes, {Mark J.} and Jes{\'u}s Otero and Theodore Panagiotidis",
year = "2015",
month = "11",
day = "1",
doi = "10.1016/j.najef.2015.09.014",
language = "English (US)",
pages = "301--313",
journal = "North American Journal of Economics and Finance",
issn = "1062-9408",
publisher = "Elsevier Inc.",

}

The expectations hypothesis and decoupling of short- and long-term US interest rates: A pairwise approach. / Holmes, Mark J.; Otero, Jesús; Panagiotidis, Theodore.

En: North American Journal of Economics and Finance, 01.11.2015, p. 301-313.

Resultado de la investigación: Contribución a RevistaArtículo

TY - JOUR

T1 - The expectations hypothesis and decoupling of short- and long-term US interest rates: A pairwise approach

AU - Holmes, Mark J.

AU - Otero, Jesús

AU - Panagiotidis, Theodore

PY - 2015/11/1

Y1 - 2015/11/1

N2 - © 2015 Elsevier Inc.The link between short-term policy rates and long-term rates elucidate the potential effectiveness of monetary policy. We examine the US term structure of interest rates using a pairwise econometric approach advocated by Pesaran (2007). Our empirical modelling strategy employs a probabilistic test statistic for the expectations hypothesis of the term structure based on the percentage of unit root rejections among all interest rate differentials. We find support for the expectations hypothesis and provide new insights into the nature of interest rate decoupling which are of value to policymakers. The maturity gap associated with interest rate pairs negatively impacts on the probability of stationarity, and also on the speed of adjustment towards long-run equilibrium. We further show that the speed of adjustment has become more sensitive to the maturity gap over time.

AB - © 2015 Elsevier Inc.The link between short-term policy rates and long-term rates elucidate the potential effectiveness of monetary policy. We examine the US term structure of interest rates using a pairwise econometric approach advocated by Pesaran (2007). Our empirical modelling strategy employs a probabilistic test statistic for the expectations hypothesis of the term structure based on the percentage of unit root rejections among all interest rate differentials. We find support for the expectations hypothesis and provide new insights into the nature of interest rate decoupling which are of value to policymakers. The maturity gap associated with interest rate pairs negatively impacts on the probability of stationarity, and also on the speed of adjustment towards long-run equilibrium. We further show that the speed of adjustment has become more sensitive to the maturity gap over time.

U2 - 10.1016/j.najef.2015.09.014

DO - 10.1016/j.najef.2015.09.014

M3 - Article

SP - 301

EP - 313

JO - North American Journal of Economics and Finance

JF - North American Journal of Economics and Finance

SN - 1062-9408

ER -