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The expectations hypothesis of the term structure: evidence for Germany

Boero, Gianna - Torricelli, Costanza (1997) The expectations hypothesis of the term structure: evidence for Germany. Working Paper. CRENoS.

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Official URL: http://www.crenos.it/working/pdf/97-4.pdf

Abstract

In this paper we examine the expectations hypothesis of the term structure (EHT) using a newly constructed monthly database of zero coupon bond yields from the German Government bond market. We use data at the short end of the maturity spectrum (maturities less than two years) and employ two approaches to predict future movements in shorter-term interest rates: one based on the yield spread, the other based on the forward-spot rate spread. We find that for the period considered, 1985:2-1994:12, both spreads contain substantial information for predicting future interest rate movements. Moreover, the results are, in general, consistent with the implications of the EHT, as far as the value of the coefficient of the spread is concerned. This means that in Germany the spread can be used as an important indicator for the conduct of monetary policy.

Item Type:Technical Report / Working Paper / Project Report (Working Paper)
Publisher:CRENoS
Date:September 1997
Institution:Universita' degli Studi di Cagliari
Divisions:Centri > CRENoS Centro Ricerche Economiche Nord Sud
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/03 Scienza delle finanze
Uncontrolled Keywords:Expectations hypothesis, forward rate, information, interest rate, term structure
ID Code:349
Deposited On:14 Nov 2008 09:47

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