Evaluating the existence of structural change in the Brazilian term structure of interest rate: evidence based on Hansens cointegration models with structural break
Palavras-chave:Term structure of interest rates, Structural change, VECM.
ResumoThis paper investigates whether there is evidence of struc- tural change in the Brazilian term structure of interest rates. Multivari- ate cointegration techniques are used to verify this evidence. An econo- metric model is estimated which is a Vector Autoregressive Model with Error Correction Mechanism (VECM) with abrupt structural change formulated by Hansen . Two datasets were analysed. The rst one contains a nominal interest rate with maturity 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 estimated models suggest the existence of structural change in the Brazilian term structure. It was possible to document the existence of multiple regimes using the tech- nique for both databases. The risk premium for dierent 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 international stand- ards, although the Brazilian term structure is still subject to liquidity problems for longer maturities.
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Marcal, E. F., & Pereira, P. L. V. (2014). Evaluating the existence of structural change in the Brazilian term structure of interest rate: evidence based on Hansens cointegration models with structural break. São Paulo Journal of Mathematical Sciences, 8(2), 211-239. https://doi.org/10.11606/issn.2316-9028.v8i2p211-239