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Carstensen, Kai (2003): Nonstationary term premia and cointegration of the term structure. In: Economics Letters, Vol. 80, Nr. 3: S. 409-413
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This paper proposes a model of the term structure with nonstationary term premia which exhibit a factor structure. This explains the common empirical finding of a cointegrating rank smaller than the one predicted by the rational expectations hypothesis of the term structure. An application to German interest rate data yields easily interpretable results.