Melbourne Institute Working Paper Series Database (1984 - 2010)

Melbourne Institute Working Paper No. 22/2007

Permanent Structural Change in the US Short-Term and Long-Term Interest Rates

by

Chew Lian Chua and Chin Nam Low

Date: August 2007

Abstract: This paper uses a time-varying error correction model to examine the structural changes in the rate of adjustment to the long-run equilibrium and the cointegrating vector of the US short- and long-term interest rates. We show that agents expectations of interest rate movements vary according to policy changes as reflected by changes in the direction of movements of the underlying parameters.

 

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