Lekkos, Ilias; Milas, Costas; Panagiotidis, Theodore - In: Journal of Forecasting 26 (2007) 8, pp. 601-619
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,...