Nonlinear Interest Rate Dynamics and Implications for the Term Structure

Posted: 7 Sep 1999

See all articles by Gerard A. Pfann

Gerard A. Pfann

Maastricht University; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Rolf Tschernig

University of Regensburg - Department of Economics and Econometrics; Maastricht University - Department of Quantitative Economics

Peter C. Schotman

Maastricht University - Department of Finance

Date Written: August 1994

Abstract

This paper explores nonlinear dynamics for the time series of the short term interest rate in the United States. The proposed model is an autoregressive threshold model augmented by conditional heteroskedasticity. The performance of the model is evaluated by considering its implications for the term structure of interest rates. The nonlinear dynamics imply a form of nonlinearity in the levels relation between the long and the short rate. Empirical results indicate that the implied nonlinearity is present in the data.

JEL Classification: E43

Suggested Citation

Pfann, Gerard Antonie and Tschernig, Rolf and Schotman, Peter C., Nonlinear Interest Rate Dynamics and Implications for the Term Structure (August 1994). Available at SSRN: https://ssrn.com/abstract=5774

Gerard Antonie Pfann

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31-43-388 3832 (Phone)
+31-43-388 4856 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Rolf Tschernig

University of Regensburg - Department of Economics and Econometrics ( email )

Universitaetsstrasse 31
D-93040 Regensburg
Germany
+49 (0) 941 943 2737 (Phone)
+49 (0) 941 943 4917 (Fax)

HOME PAGE: www.wiwi.uni-regensburg.de/tschernig

Maastricht University - Department of Quantitative Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

HOME PAGE: www.personeel.unimaas.nl/r.tschernig

Peter C. Schotman (Contact Author)

Maastricht University - Department of Finance ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 388 3862 (Phone)
+31 43 388 4875 (Fax)

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