TY - JOUR
T1 - When Unit Roots Matter: Excess Volatility and Excess Smoothness of Long-Term Interest Rates
AU - Schotman, P.C.
PY - 2001/1/1
Y1 - 2001/1/1
N2 - This paper re-examines volatility tests of the expectations model of the term structure of interest rates. In a multivariate vector autoregression (var) including interest rates, prices, money and output, we find that the long-term interest rate overreacts to all transitory shocks, and underreacts to all permanent shocks, irrespective of the number of unit roots and the cointegration structure in the system.
AB - This paper re-examines volatility tests of the expectations model of the term structure of interest rates. In a multivariate vector autoregression (var) including interest rates, prices, money and output, we find that the long-term interest rate overreacts to all transitory shocks, and underreacts to all permanent shocks, irrespective of the number of unit roots and the cointegration structure in the system.
U2 - 10.1016/S0927-5398(01)00040-8
DO - 10.1016/S0927-5398(01)00040-8
M3 - Article
SN - 0927-5398
VL - 8
SP - 669
EP - 694
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
ER -