Year: 2010
Author: Monteiro, Olga Susana M, Lopes, Artur C. B. da Silva
Applied Economics Quarterly, Vol. 56 (2010), Iss. 3 : pp. 257–279
Abstract
The purpose of this paper is to test both short- and long-run implications of the (rational) expectations hypothesis of the term structure of interest rates using Portuguese data for the interbank money market. The results support only a very weak, long-run or “asymptotic” version of the hypothesis, and broadly agree with previous (but separate) evidence for other countries.
Empirical evidence supports the cointegration of Portuguese rates and the “puzzle” well known in the literature: although its forecasts of future short-term rates are in the correct direction, the spread between longer and shorter rates fails to forecast future longer rates. Further short-run implications of the hypothesis in terms of the predictive ability of the spread are also clearly rejected, even for the more stable period which emerged in the middle nineties.
JEL Classification: E43, C22, C32
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Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.3790/aeq.56.3.257
Applied Economics Quarterly, Vol. 56 (2010), Iss. 3 : pp. 257–279
Published online: 2010-07
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 23