Working Paper: NBER ID: w0563
Authors: Robert J. Shiller
Abstract: A linearized version of the rational expectations models of the term structure is put forth in terms of a complete vector of equally spaced observations along the yield curve. A data series on intermediate maturity yields which meets the specifications of the model is presented. The model is tested against a specific and easily interpreted alternative. Earlier studies of rational expectations models, which used "volatility tests" or "likelihood ratio tests," are discussed.
Keywords: Rational Expectations; Term Structure; Interest Rates
JEL Codes: E43; E44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| yield curve (E43) | expected future interest rates (E43) |
| long-term interest rates (E43) | short-term interest rates (E43) |
| shape of yield curve (E43) | interest rate expectations (E43) |
| volatility of long-term interest rates (E43) | rational expectations model (D84) |
| omitted variable bias (C20) | conclusions about interest rates (E43) |
| data set improvements (C55) | specification of hypotheses (C12) |