The Spanish term structure of interest rates revisited: Cointegration with multiple structural breaks, 1974–2010

Abstract

In this paper we consider the possibility that a linear cointegrated regression model with multiples structural changes would provide a better empirical description of the term structure model of interest rates. Our methodology is based on instability tests recently proposed in Kejriwal and Perron (2010) as well as the cointegration test in Arai and Kurozumi (2007) and Kejriwal (2008) developed to allow for multiple breaks under the null hypothesis of cointegration.

Does interest rate liberalisation affect the constancy of mean interest rates in China?

“…Therefore, we conclude that there are four important shifts in the mean of all interest rates over the period studied. The finding of the similar performance of interest rates with different maturities is consistent with previous studies (Arize et al , 2002; Paya et al , 2005; Esteve et al , 2013). The expectation hypothesis on the term structure of interest rates indicates that long-term interest rates are the averages of future short-term interest rates.…”

Price cointegration between sovereign CDS and currency option markets in the financial crises of 2007–2013

“…Thus, a larger variance can facilitate a larger deviation of the cointegration relationship from the constant cointegration. 11 The motivation of this extension is consistent with Hansen (1992)'s cointegration model in which the errors display non-stationary variances; the regime-shifting models in the long-run equation in Gregory and Hansen (1996), Perron (2008, 2010), Esteve, Navarro-lbanez, and Prats (2013), and Zhang and Li (2014); and the threshold autoregression models in Balke and Fomby (1997), Hansen and Seo (2002), and Al-Abri and Goodwin (2009) in which the long-run equilibrium error is allowed to move freely within a given range but mean-reverting outside the range. Therefore, this simple extension can serve two purposes.…”

Does the Term Structure of Interest Rates Hold True for East-Asian Countries? More Powerful Nonlinear Cointegration Tests

“…Empirical research on the EHTS of interest rates is luxuriant but far from unequivocal so far. In the related studies, the conventional linear model and threshold model are frequently employed to analyze the EHTS of interest rates, such as Shiller (1978a,1991b), Quiros-Romero and Sosvilla-Rivero (1997), Enders and Granger (1998), Camarero and Tamarit (2002), Sarno et al (2007), Suardi (2010), Esteve et al (2013) and Muzindutsi and Mposelwa (2021) et al Recently, a growing agreement has emerged that the EHTS of interest rates demonstrates nonlinear adjustment, for example, Bachmeier and Li (2002), Maki (2006), Haug and Siklos (2007), Sun and Lai-Lei (2012), Guney (2013), Huang and Wang (2014), Grisse (2015), Zhu and Rahman (2015), Cai and Wang (2017), Song et al (2017), Bekiros et al (2018), Liu et al (2020) and Mineo et al (2020) This empirical study enriches this line of research by evaluating whether the EHTS of interest rates holds true in a sample of seven East Asian nations, and whether the adjustment towards their equilibrium takes place in a nonlinear manner. Economic integration appears to be increasing in Asia, and Asia is now playing a significant role in the globe as well.…”