Are German money market rates well behaved?

Cuthbertson, Keith; Hayes, Simon; Nitzsche, Dirk

doi:10.1016/s0165-1889(99)00009-3

Cited by 10 publications

(13 citation statements)

References 27 publications

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“…While all studies cannot reject the cointegration hypothesis, Bundhia and Chadha (1998) cannot find evidence (2001) finds different results for France and the United Kingdom on the one side, for which he cannot reject the theory, and Germany on the other, for which the theory is in most cases rejected. The latter result is in contrast with the study of Cuthbertson et al (2000) which cannot reject the EH theory for the German money market. As discussed in Section 5, the better results for European countries compared to the United States perhaps have something to do with the stability of the coefficients in the monetary policy objective function.…”

Section: Empirical Evidence Of the Ehtscontrasting

confidence: 95%

“…Many authors have found some support of the expectations hypothesis theory of the term structure (EHTS) for Germany at the short end of the yield curve (see Cuthbertson et al, 2000;Cassola and Barros-Luis, 2001;Hassler and Wolters, 2001). The paper checks how these results are affected by including the data set for the euro money market rates.…”

Section: Introductionmentioning

confidence: 99%

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The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro Area

Durré

2006

German Economic Review

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This paper investigates to what extent the expectations hypothesis of the term structure (EHTS) of interest rates receives some support since the launch of the European single currency. Empirical evidence shows that in general this theory applies to most European countries, and to Germany in particular. The objective of this paper thus is twofold. First, the EHTS for the German money market and for a larger sample including the German mark period and the euro money market is tested in order to check whether the results for the former are affected by the new financial environment since January 1999. Second, the implications of the results for the monetary policy assessment are discussed. We estimate cointegrating vector autoregressive models in order to quantify the level of the liquidity premium. The results suggest that financial markets do not consider the monetary policy of the European Central Bank simply as the one prevailing during the German period. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2006.

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Section: Empirical Evidence Of the Ehtscontrasting

confidence: 95%

Section: Introductionmentioning

confidence: 99%

The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro Area

Durré

2006

German Economic Review

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“…If H = n, then the return from the investment in the long n-period bill is known with certainty 10 , such that E T r (n)…”

Section: Investment Strategiesmentioning

confidence: 99%

Decision‐Based Forecast Evaluation of UK Interest Rate Predictability

Sirichand

Hall

2015

Journal of Forecasting

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This paper illustrates the importance of density forecasting and forecast evaluation in portfolio decision making. The decision‐making environment is fully described for an investor seeking to optimally allocate her portfolio between long and short Treasury bills, over investment horizons of up to 2 years. We examine the impact of parameter uncertainty and predictability in bond returns on the investor's allocation and we describe how the forecasts are computed and used in this context. Both statistical and decision‐based criteria are used to assess the predictability of returns. Our results show sensitivity to the evaluation criterion used and, in the context of investment decision making under an economic value criterion, we find some potential gain for the investor from assuming predictability. Copyright © 2015 John Wiley & Sons, Ltd.

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“…When applied on US data, this methodology generally leads to a rejection of the hypothesis (see for instance Evans and Lewis, 1994, Campbell and Shiller, 1991, Shea, 1991. Somewhat better results have been obtained with data on other countries, although the evidence in favour of REH is far from overwhelming (see among many others Prats Albentosa and , Cuthbertson et al, 2000, Ghazali and Low, 2002, Cooray, 2003. Using another approach, based on a linear regression of the expectation error on the lags of interest rates, Johnson (1997) Kalev and Inder (2006) express serious doubts about the econometric validity of these results; with more sophisticated -although linear-methods, they reach opposite conclusions.…”

Section: Introductionmentioning

confidence: 96%

Markov-switching models, rational expectations and the term structure of interest rates

Beyaert

Pérez-Castejón

2009

Applied Economics

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Abstract:In order to evaluate the efficiency of the monetary transmission mechanism, we develop the formulas for testing rational expectations theory in the term structure of interest rates with VAR models of stochastically switching regimes in which all the parameters are regimedependent. These formulas are obtained for the strict version of rational expectations as well as for the case where measurement errors are assumed in the expectations relationship.They are extensible to other contexts that involve variables linked by rational-expectations behaviours. The testing procedure is implemented on interest rates of the Spanish inter-bank money market. Measurement errors must be assumed to find signs favourable to the theory. JEL classification: C32, C12, E43

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Are German money market rates well behaved?

Cited by 10 publications

References 27 publications

The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro Area

The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro Area

Decision‐Based Forecast Evaluation of UK Interest Rate Predictability

Markov-switching models, rational expectations and the term structure of interest rates

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