Conventional approaches to examining the expectation hypothesis of interest rates assume a parametric linear specification among variables. In contrast, this paper tests the hypothesis using a flexible nonlinear inference approach proposed by Hamilton (2001). We examine the impact of the...

We examine the empirical evidence on the expectations hypothesis of the term structure of interest rates in the United States, the United Kingdom, and Germany using the Campbell-Shiller (1991) regressions and a vector-autoregressive" methodology. We argue that anomalies in the U.S. term...