English, Article, Journal or magazine article edition: Markov Switching Risk Premium and the term structure of interest rates. Mª Jose Gutierrez; Jesús Vazquez

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Bookmark: http://trove.nla.gov.au/version/183267
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Markov Switching Risk Premium and the term structure of interest rates.
Author
  • Mª Jose Gutierrez
  • Jesús Vazquez
Physical Description
  • preprint
Notes
  • This paper considers the basic present value model of interest rates under rational expectations with two additional features. First, following McCallum (1994), the model assumes a policy reaction function where changes in the short-term interest rate are determined by the long-short spread. Second, the short-term interest rate and the risk premium processes are characterized by a Markov regime-switching model. Using US post-war interest rate data, this paper …nds evidence that a two-regime switching model …ts the data better than the basic model. The estimation results also show the presence of two alternative states displaying quite different features.
  • term-structure, risk premium, Markov regime-switching
  • RePEc:ehu:dfaeii:200224
Language
  • English
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