Working Paper

The term structure of interest rates in the onshore markets of the United States, Germany, and Japan

Abstract: This paper investigates term premia behavior in U.S., German, and Japanese markets. Onshore returns are evaluated in order to focus on the co-movement of the term premia across a set of potentially heterogeneous markets. The paper extends the work of Campbell and Clarida [1987], who find that the term premia within the Euromarket appear to move together. In keeping with their approach, Hansen and Hodrick's [1983] latent variable model is used. The model constrains expected returns, conditional on an information set, to be proportional to one another. These restrictions are not rejected for the markets examined here, implying that the term premia behave as if in a single market.

Keywords: Interest rates; Germany; Japan;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 1990

Number: 382