How Do Term Premia Change Over Time? Evidence from the us Dollar Libor Data Using a Fourier Approximation

• Autorzy: Paweł Miłobędzki
• Języki publikacji: EN

Abstrakty

EN

Using Gallant's (1981) version of the Fourier flexible form we modify the perfect foresight spread equation that allows for a time-varying term premium and estimate it on the weekly sampled US dollar LIBORs ranging from January 1998 to June 2013 to find out that the term premia not only vary over time for the whole spectrum of maturities but are periodic, change with the US business cycle and are broken within the recession periods. We also reveal that - on average - the longer the maturity, the greater the term premium, both in the boom and in the recession. The other significant feature of the term premia for all maturities is that the boom premia are many times smaller than their recession counterparts. For the maturities of 35 weeks and over, the yield spread is a good predictor of future changes in the short interest rate. For other maturities it turns out to be a downwards biased predictor. Except for the two shortest maturities, all restricted perfect foresight spread regressions, i.e. those ignoring the change of premia with the business cycle and their breaks, are misspecified.(original abstract)

Słowa kluczowe

EN

Interest rate; Variable interest rates; Fourier series; Dollar; LIBOR (London Interbank Offered Rate)

PL

Stopa procentowa; Zmienne stopy procentowe; Szereg Fouriera; Dolar; LIBOR (London Interbank Offered Rate)

• Czasopismo: Argumenta Oeconomica
• Rocznik: 2016
• Numer: nr 1 (36)
• Strony: 67--86

Twórcy

autor

Paweł Miłobędzki

• University of Gdansk, Poland

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Identyfikatory

DOI

10.15611/aoe.2016.1.03