Tests of the Expectations Hypothesis and Policy Reaction to the Term Spread: some comparative evidence
نویسندگان
چکیده
The aim of this paper is to evaluate the impact of monetary policy in tests of the Expectations Hypothesis of the term structure of interest rates. We apply the model developed by McCallum (1994b), in which the Expectations Hypothesis interacts with a policy reaction function and with a time-varying term premium, to eight countries with different monetary policy stances, within the period 1985 to 1995. The results suggest the importance of the treatment of monetary policy in explaining the empirical performance of the Expectations Hypothesis. Amongst other results, we also find that the model performs better for some countries than others depending upon the monetary policy stance adopted.
منابع مشابه
The expectations hypothesis of the term structure of interest rates , open interest rate parity and central bank policy reaction *
A rational expectations model with endogenous monetary policy reacting to the exchange rate and the term spread shows that the empirical performance of the expectations hypothesis of the term structure and the uncovered interest rate parity hypothesis improves with the strength of the policy reaction to the exchange rate and the term spread, respectively. 2000 Elsevier Science S.A. All rights...
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