Artikel

A Comparative Analysis of the Expectations Hypothesis of the Term Structure of Interest Rates between the BRICS and G7 Countries

This paper examines the predictive ability of the expectations hypothesis of the term structure of interest rates in the BRICS and G7 countries by relating each country's monthly 3-month Treasury bill rate to 10-year government bond rates, from May 2003 to May 2018. The panel ARDL model, applying the mean group (MG), pooled mean group (PMG), and dynamic fixed effects (DFE) estimators, is employed to compare the short- and long-run relationships in both groups of countries. The results show that the expectations hypothesis holds in both BRICS and G7 country groups. In the long run, the short-term interest rate is able to predict the long-term interest rate in both the BRICS and G7 countries. Interest rates in BRICS indicate rapid adjustment back to the long-run equilibrium, while the adjustment is sluggish in the G7 block. Based on the findings of the study, the sluggish adjustment to the equilibrium in the G7 gives the impression that the financial crisis had an impact on the term structure of interest rates as the G7 countries were directly affected by the crisis.

Language
Englisch

Bibliographic citation
Journal: Comparative Economic Research. Central and Eastern Europe ; ISSN: 2082-6737 ; Volume: 24 ; Year: 2021 ; Issue: 2 ; Pages: 87-102 ; Łódź: Łódź University Press

Classification
Wirtschaft
Interest Rates: Determination, Term Structure, and Effects
Asset Pricing; Trading Volume; Bond Interest Rates
Subject
Expectations hypothesis
panel ARDL
BRICS
term structure

Event
Geistige Schöpfung
(who)
Muzindutsi, Paul‑Francois
Mposelwa, Sinethemba
Event
Veröffentlichung
(who)
Łódź University Press
(where)
Łódź
(when)
2021

DOI
doi:10.18778/1508-2008.24.13
Handle
Last update
10.03.2025, 11:45 AM CET

Data provider

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Object type

  • Artikel

Associated

  • Muzindutsi, Paul‑Francois
  • Mposelwa, Sinethemba
  • Łódź University Press

Time of origin

  • 2021

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