Testing the Expectations Hypothesis for Interest Rate Term Structure: Some Australian Evidence
Many test results are found inconsistent with the expectations hypothesis of the term structure. The aim of this paper is to re-examine the expectations hypothesis of the term structure using the Australian interest rate data from 1969(7) to 1995(7). We start with the cointegration test on R t, rt, and S t followed by the Granger causality test from S t to ∇ r t. Finally we carry out the VAR model of cross-equation restrictions test. Our findings show that there is no conclusive rejection of the expectations hypothesis of the term structure.
KeywordsInterest Rate Granger Causality Term Structure Granger Causality Test Short Rate
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