The Spanish term structure of interest rates revisited: cointegration with multiple structural breaks, 1974-2010

In this paper we consider the possibility that a linear cointegrated regression model with multiples structural changes would provide a better empirical description of the term structure model of interest rates. Our methodology is based on instability tests recently proposed in Kejriwal and Perron (2010) as well as the cointegration test in Arai and Kurozumi (2007) and Kejriwal (2008) developed to allow for multiple breaks under the null hypothesis of cointegration.