The expectations hypothesis, term premia, and the Canadian term structure of interest rates

In this paper monthly data are used over the period 1960:7 to 1995:12 to examine the determinants of term premia implicit in the Canadian T-bill term structure of interest rates. In sharp contrast to U.S. evidence, the conditional variances of Canadian macroeconomic variables are found to be insignificant predictors of term premia in the Canadian T-bill term structure. The conditional variances of U.S. macroeconomic variables, however, are found to be important determinants of Canadian term premia.

[1]  L. Summers,et al.  Do Long-Term Interest Rates Overreact to Short-Term Interest Rates? , 1984 .

[2]  John Y. Campbell,et al.  Some Lessons from the Yield Curve , 1995 .

[3]  The Canadian treasury bill auction and the term structure of interest rates , 2002 .

[4]  C. Nelson.  Testing a Model of the Term Structure of Interest Rates by Simulation of Market Forecasts , 1970 .

[5]  P. Boothe.  Interest Parity, Cointegration, and the Term Structure in Canada and the United States , 1991 .

[6]  R. Shiller.  The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure , 1979, Journal of Political Economy.

[7]  James E. Pesando.  Determinants of Term Premiums in the Market for United States Treasury Bills , 1975 .

[8]  E. Fama,et al.  The information in the term structure , 1984 .

[9]  P. Duguay.  Empirical evidence on the strength of the monetary transmission mechanism in Canada: An aggregate approach , 1994 .

[10]  Angelo Melino.  The Term Structure of Interest Rates: Evidence and Theory , 1986 .

[11]  N. Mankiw,et al.  The Term Structure of Interest Rates Revisited , 1986 .

[12]  Martin D. D. Evans,et al.  Do Stationary Risk Premia Explain it All? Evidence from the Term Struct , 1994 .

[13]  Allan W. Gregory,et al.  The Term Structure of Interest Rates: Departures from Time-Separable Expected Utility , 1991 .

[14]  R. Engle.  Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation , 1982 .

[15]  G. Hardouvelis,et al.  The term structure spread and future changes in long and short rates in the G7 countries: Is there a puzzle? , 1994 .

[16]  The term structure of Euro interest rates and rational expectations , 1990 .

[17]  Robert J. Shiller,et al.  Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates , 1983 .

[18]  F. Smets,et al.  Exchange Rate Regimes and the Expectations Hypothesis of the Term Structure , 1997 .

[19]  Thomas H. McCurdy,et al.  An International Economy with Country-Specific Money and Productivity Growth Processes , 1995 .

[20]  Russell P. Robins,et al.  Estimating Time Varying Risk Premia in the Term Structure: The Arch-M Model , 1987 .