Evaluating the existence of structural change in the Brazilian term structure of interest: evidence based on cointegration models with structural break

AUTOR(ES)
DATA DE PUBLICAÇÃO

05/07/2012

RESUMO

This paper investigates whether there is evidence of structural change in the Brazilian term structure of interest rates. Multivariate cointegra- tion techniques are used to verify this evidence. Two econometrics models are estimated. The rst one is a Vector Autoregressive Model with Error Correction Mechanism (VECM) with smooth transition in the determin- istic coe¢ cients (Ripatti and Saikkonen [25]). The second one is a VECM with abrupt structural change formulated by Hansen [13]. Two datasets were analysed. The rst one contains a nominal interest rate with ma- turity up to three years. The second data set focuses on maturity up to one year. The rst data set focuses on a sample period from 1995 to 2010 and the second from 1998 to 2010. The frequency is monthly. The estim- ated models suggest the existence of structural change in the Brazilian term structure. It was possible to document the existence of multiple re- gimes using both techniques for both databases. The risk premium for di¤erent spreads varied considerably during the earliest period of both samples and seemed to converge to stable and lower values at the end of the sample period. Long-term risk premiums seemed to converge to inter- national standards, although the Brazilian term structure is still subject to liquidity problems for longer maturities.

ASSUNTO(S)

term structure of interest rates structural change vecm

ACESSO AO ARTIGO

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