Permanent Structural Change in the US Short-Term and Long-Term Interest Rates
Melbourne Institute Working Paper No. 22/07
Date: August 2007
This paper uses a time-varying error correction model to examine the structural changes in the rate of adjustment to the long-run equilibrium and the cointegrating vector of the US short- and long-term interest rates. We show that agents’ expectations of interest rate movements vary according to policy changes as reflected by changes in the direction of movements of the underlying parameters.