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| Author: | Boero, G. Torricelli, C. |
| Title: | The information in the term structure of German interest rates |
| Journal: | European Journal of Finance
2002 : MAR, VOL. 8:1, p. 21-45 |
| Index terms: | INTEREST RATES TERM STRUCTURE OF INTEREST RATES GERMANY ANALYTICAL REVIEW INFORMATION |
| Language: | eng |
| Abstract: | This paper tests the Expectations Hypothesis (EH) of the term structure of interest rates using new data for Germany. The German term structure appears to forecast future short-term interest rates surprisingly well, compared with previous studies with US data, while it has lower predictive power for long-term interest rates. However, the direction suggested by the coefficient estimates is consistent with that implied by the EH, that is when the term spread widens, long rates increase. The use of instrumental variables to deal with possible measurement errors in the data significantly improves regressions for the long rates. |
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