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 una revistaArtículorevisión exhaustiva

3 Citas (Scopus)

Resumen

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 originalInglés estadounidense
Páginas (desde-hasta)301-313
Número de páginas13
PublicaciónNorth American Journal of Economics and Finance
Volumen34
DOI
EstadoPublicada - nov 1 2015

All Science Journal Classification (ASJC) codes

  • Finanzas
  • Economía y econometría

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