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osu1064238845.pdf (659.59 KB)
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Essays on the term structure of interest rates
Author Info
Aroskar, Nisha suhas
Permalink:
http://rave.ohiolink.edu/etdc/view?acc_num=osu1064238845
Abstract Details
Year and Degree
2003, Doctor of Philosophy, Ohio State University, Economics.
Abstract
This dissertation contributes to the study of the term structure of interest rates by addressing some of the gaps in this literature. The term structure is an important channel of monetary transmission. It also contains information about the intertemporal choices made by economic agents. The expectations Hypothesis is the primary explanation in economics that links short term interest rates to long term interest rates. In the first essay I extend the literature by examining the expectations hypothesis in the newly developed financial markets. I find that the expectations theory is not rejected in these markets. This evidence is in sharp contrast to the evidence earlier presented for industrialized countries. Further, contrary to the simple expectations theory, the term premium has high persistence, which is reflected in significantly autoregressive error terms. The evidence also supports the longstanding suggestion that the term premium could be related to the liquidity in the economy. The next essay investigates the forecasting ability of the term spread for future output growth. There appears to be a sharp decline in the predictive power of the term spread in countries that have adopted monetary policy with a stronger response to inflation. To explore the underlying economic reasons for these findings, I explicitly model the information content of the term spread for future output growth based on a structural model. Model calibrations suggest that the forecasting ability of the term spread changes with a change in the persistence and the variance of the underlying economic shocks and in the monetary policy preferences. The last essay focuses on the term structure as a link between short term and long term interest rates in macroeconomic models. I integrate the New Keynesian model and the model of the term structure based on the Intertemporal Consumption Asset Pricing Model. This is a more plausible description of the economy compared to the earlier models. In this model, output responds to an interest rate that includes a time varying term premium which, in turn is associated with economic agents expectations about the future economic variables. Empirical results provide confidence for future research in this direction.
Committee
Paul Evans (Advisor)
Pages
155 p.
Keywords
Term Structure of interest rates
;
Term Premium
;
Expectations hypothesis
;
Macroeconomic forecasting
;
New Keynesian model
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Citations
Aroskar, N. S. (2003).
Essays on the term structure of interest rates
[Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1064238845
APA Style (7th edition)
Aroskar, Nisha.
Essays on the term structure of interest rates.
2003. Ohio State University, Doctoral dissertation.
OhioLINK Electronic Theses and Dissertations Center
, http://rave.ohiolink.edu/etdc/view?acc_num=osu1064238845.
MLA Style (8th edition)
Aroskar, Nisha. "Essays on the term structure of interest rates." Doctoral dissertation, Ohio State University, 2003. http://rave.ohiolink.edu/etdc/view?acc_num=osu1064238845
Chicago Manual of Style (17th edition)
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Document number:
osu1064238845
Download Count:
6,141
Copyright Info
© 2003, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.