The purpose of this study is to identify sources of regime switching in short-term interest rates for Canada. The choice of information variables is based on three well-known hypotheses about interest rates: the expectations hypothesis, the Fisher relationship, and the condition for uncovered...

This study extends a state-space representation of the yield curve and the macroeconomy to a small open economy in order to study the dynamic interaction between the yield curves in Canada and the U.S. The framework treats the U.S. term structure of interest rates as being exogenous to both the...