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Bayesian estimation of co-integrating thresholds in the term structure of interest rates.

Balcombe, K. (2006) Bayesian estimation of co-integrating thresholds in the term structure of interest rates. Empirical Economics, 31 (2). pp. 277-289. ISSN 0377-7332

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To link to this item DOI: 10.1007/s00181-005-0011-z

Abstract/Summary

Threshold Error Correction Models are used to analyse the term structure of interest Rates. The paper develops and uses a generalisation of existing models that encompasses both the Band and Equilibrium threshold models of [Balke and Fomby ((1997) Threshold cointegration. Int Econ Rev 38(3):627–645)] and estimates this model using a Bayesian approach. Evidence is found for threshold effects in pairs of longer rates but not in pairs of short rates. The Band threshold model is supported in preference to the Equilibrium model.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Life Sciences > School of Agriculture, Policy and Development
ID Code:8271
Uncontrolled Keywords:Threshold - Cointegration - Bayesian

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