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The Expectations Hypothesis of the Term Structure: Further Empirical Evidence for India (1996-2013) - La struttura a termine dei tassi di interesse: ulteriore evidenza empirica per l’India (1996-2013)

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  • Tronzano, Marco

    (Università degli Studi di Genova, Scuola di Scienze Sociali, Dipartimento di Economia)

Abstract

This paper extends the analysis of Tronzano (2014) inside a multivariate cointegration framework. I show that the Indian term structure of interest rates is driven by one common stochastic trend. Moreover, closely in line with Tronzano (2014), I document that the “symmetry” condition on cointegrating vectors is supported by data, whereas the “Pure” version of the Expectations Hypothesis is strongly rejected. Further investigation through variance decomposition tests and persistency profiles of cointegrating vectors corroborates other results obtained in Tronzano (2014) (i.e. short-term interest rate exogeneity and a faster adjustment speed of spreads at shorter maturities). Overall, these results provide strong empirical support for a monetary policy strategy relying on a short-term interest rate target. - Questo lavoro estende l’analisi condotta in Tronzano (2014) in un contesto di cointegrazione multivariata e mostra che la struttura a termine dei tassi di interesse in India è guidata da un trend stocastico comune. Inoltre, in linea con Tronzano (2014), si mostra che la condizione di “simmetria” sui vettori di contegrazione è supportata dai dati, mentre la versione “pura” della “Expectations Hypothesis” è fortemente rigettata dall’evidenza empirica. Ulteriori analisi attraverso i tests di decomposizione della varianza e i profili di persistenza dei vettori di cointegrazione supportano altri risultati ottenuti in Tronzano (2014) (cioè la esogeneità del tasso di interesse a breve termine e una maggiore velocità di aggiustamento dei differenziali dei tassi di interesse per le scadenze più brevi). Nel complesso, questi risultati forniscono un robusto supporto empirico a una strategia di politica monetaria basata sul controllo di un tasso di interesse a breve termine da parte della Banca Centrale.

Suggested Citation

  • Tronzano, Marco, 2015. "The Expectations Hypothesis of the Term Structure: Further Empirical Evidence for India (1996-2013) - La struttura a termine dei tassi di interesse: ulteriore evidenza empirica per l’India (1996-2013)," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 68(3), pages 401-421.
    • Handle: RePEc:ris:ecoint:0760
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Term Structure of Interest Rates; Multivariate Cointegration; India; Monetary Policy;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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