Milas, Costas; Panagiotidis, Theodore; Lekkos, Ilias - Centre for Economic Research, School of Economics and … - 2006
This paper explores the ability of factor models to predict the dynamics of US and UK interest rate swap spreads within a linear and a non-linear framework. We reject linearity for the US and UK swap spreads in favour of a regime-switching smooth transition vector autoregressive (STVAR) model,...