Motivated by economic-theory concepts - the Fisher hypothesis and the theory of the term structure - we consider a small set of simple bivariate closed-loop time-series models for the prediction of price inflation and of long- and short-term interest rates. The set includes vector...

We empirically investigate whether the relationship between interest rates and public deficits/debt may be nonlinear for the U.S. Using threshold estimation, we find evidence of level-dependent effects on interest rates, implying a significant effect of projected deficits and debt in the U.S....

Recently a variety of exchange and interest rate models capturing the dynamics during the transition from an exchange rate arrangement of floating rates into a currency union have been derived. While these stochastic equilibrium models in continous time are theoretically rigorous, a systematic...

It is widely believed that the Fed controls the funds rate by altering the degree of pressure in the reserve market through open market operations when it changes its target for the federal funds rate. Recently, however, several economists have suggested that open market operations may not be...

The terms and conditions on which bank loans are made to non-financial firms and households play a key role in the transmission of monetary policy. This paper analyses the relationship between German bank lending rates and both money market and capital market rates in the 1990s. This study...

In this paper, we investigate the relationship between stock returns and short-term interest rates. Identification of the stock return-interest rate relation is solved by using a new technique that relies on the heteroskedasticity of shocks to stock market returns. We suggest some improvements...

This paper studies a nonlinear one-factor term structure model in discrete time. The single factor is the short-term interest rate, which is modeled as a self-exciting threshold autoregressive (SETAR) process. Our specification allows for shifts in the intercept and the variance. The process is...

This paper looks at the dynamic price relationship between spreads in the corporate bond market and credit default swaps (CDS). It picks up where Blanco et al (2005) leave off but is focused on European credit markets. The study is based on companies listed in the iTraxx CDS index and thus on...

In this paper we follow an empirical approach to examine the implications of the Fisher hypothesis, namely cointegration linking interest rates and inflation, and stationarity of the real interest rate implying in turn homogeneity of the potential equilibrium relation. The considered sample is...

In the last few years it has been possible to observe decreasing interest margins for German universal banks. At the same time, institutions increasingly moved part of their business from interest to fee-earning activities. This study analyzes the determinants of non-interest income and its...