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Working Paper Series no. 35: The Expectations Hypothesis of the Term Structure: Tests on US, German, French, and UK Euro-rates (En français et en anglais)

Abstract

This paper deals with tests of the expectations hypothesis of the term structure on French, German, UK and US short-term interest rates. Three tests are examined: the first is based on forward rates and the other two are based on the interest rates spread. First, we show that the puzzle highlighted by Campbell and Shiller (1991) for US data does not hold in the cases of French and UK short-term rates. Second, we propose tests for the expectations hypothesis based on error-correction specifications. These tests are shown to be much more favorable for the theory and the initial puzzle disappears.

Eric Jondeau and Roland Ricart
May 1996

Classification JEL : E 43

Keywords : Term structure of interest rates, Expectations hypothesis, Error-correction model

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publication
Working Paper Series no. 35: The Expectations Hypothesis of the Term Structure: Tests on US, German, French, and UK Euro-rates (En français et en anglais)
  • Published on 05/01/1996
  • FR
  • PDF (791.31 KB)
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Updated on: 06/12/2018 11:09