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Non-linear interest rate dynamics and forecasting: evidence for US and Australian interest rates.
- Source :
- International Journal of Finance & Economics; Apr2009, Vol. 14 Issue 2, p139-155, 17p, 6 Charts, 3 Graphs
- Publication Year :
- 2009
-
Abstract
- Recent empirical finance research has suggested the potential for interest rate series to exhibit non-linear adjustment to equilibrium. This paper examines a variety of models designed to capture these effects and compares both their in-sample and out-of-sample performance with a linear alternative. Using short- and long-term interest rates we report evidence that a logistic smooth-transition error-correction model is able to best characterize the data and provide superior out-of-sample forecasts, especially for the short rate, over both linear and non-linear alternatives. This model suggests that market dynamics differ depending on whether the deviations from long-run equilibrium are above or below the threshold value. Copyright © 2007 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]
- Subjects :
- FINANCE
INTEREST rates
EQUILIBRIUM
DYNAMICS
INTEREST rate futures
INTEREST rate swaps
Subjects
Details
- Language :
- English
- ISSN :
- 10769307
- Volume :
- 14
- Issue :
- 2
- Database :
- Complementary Index
- Journal :
- International Journal of Finance & Economics
- Publication Type :
- Academic Journal
- Accession number :
- 36868127
- Full Text :
- https://doi.org/10.1002/ijfe.358