This paper re-examines the validity of the Expectation Hypothesis (EH) of the term structure of US repo rates ranging in maturity from overnight to three months. We extend the work of Longstaff (2000) in two directions: (i) we implement statistical tests designed to increase test power in this...

This paper investigates the source of predictability of bond risk premia by means of long-term forward interest rates. We show that the predictive ability of forward rates could be due to the high serial correlation and cross-correlation of bond prices. After a simple reparametrization of models...

Motivated, on the one hand, by the belief that the Fed controls the short-term rate through open market operations, and on the other, by quot;the lack of convincing proof that this is what happens,quot; Hamilton (1997) suggested that more convincing evidence of the liquidity effect could be...

There are two unresolved puzzles in the empirical foreign exchange literature. The first is the finding that tests of forward rate unbiasedness using the forward rate and forward premium equations yield markedly different conclusions. A companion puzzle - the forward premium puzzle - is the fact...

Please enter abstract text here. This paper uses a dynamic factor model recently studied by Forni, Hallin, Lippi and Reichlin (2000) and Forni, Giannone, Lippi and Reichlin (2004) to analyze the response of 21 U.S. interest rates to news. Using daily data, we find that the news that affects...

The phrase quot;liquidity effectquot; was introduced by Milton Friedman (1969) to describe the first of three effects on interest rates caused by an exogenous change in the money supply. The lack of empirical support for the liquidity effect using monthly and quarterly data led Hamilton (1997)...

Despite its important role in monetary policy and finance, the expectations hypothesis (EH) of the term structure of interest rates has received virtually no empirical support. The empirical failure of the EH was attributed to a variety of econometric biases associated with the single-equation...

Despite its important role in monetary policy and finance, the expectations hypothesis (EH) of the term structure of interest rates has received virtually no empirical support. The empirical failure of the EH was attributed to a variety of econometric biases associated with the single-equation...

We examine empirically whether asset prices and exchange rates may be admitted into a standard interest rate rule, using data for the US, the UK and Japan since 1979. Asset prices and exchange rates can be employed as information variables for a standard 'Taylor-type' rule or as arguments in an...

We provide empirical evidence that deviations from uncovered interest rate parity (UIP) display significant nonlinearities, consistent with theories based on transaction costs or limits to speculation. This evidence suggests that the forward bias documented in the literature may be less...