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ELTON PARULIAN SIREGAR (01011281520216)

NO Judul & tahun Penulis & sumber Variabel Metode Penelitian Hasil Kesimpulan
Penelitian
1 Modeling the Stephen F. Gray - regime- The conditional The log-likelihood This paper
conditional Fuqua School of switching variance function can be develops a
distribution of Business, Duke - interest rate process constructed generalized
interest rates Universit). accommodates recursively, in the regime-switching
as a regime- Durham NC volatility same way (GRS) model of
switching 27708, USA clustering and as in a GARCH the shortterm
process (Received May dependence on the model. This is interest rate. The
1995; final level of the interest done by choosing short rate exhibits
version received rate. A first-order a 'startup' value or a different degree
January. 1996) Markov process initial of mean reversion
with state- conditions for the and a different
dependent probability form of
transition process. This value conditional
probabilities can either be (a) heteroskedasticity
governs estimated in each regime.
the switching as an additional The form of
between regimes. parameter or (b) the conditional
The GRS model is set at some variance in each
compared with arbitrary value regime is general
various existing (say the and nests the
models unconditional popular GARCH
of the short rate in probability) on the and CIR (square
terms of (1) the basis that the root process)
statistical fit of initial choice of specifications. A
short-term interest the probability first-order Markov
rate data and (2) process process with
out-of-sample becomes irrelevant state-dependent
forecasting in a large sample. transition
performance. The whole series probabilities
of p11's can then governs the
be switching between
built up regimes.
recursively in the The empirical
same way that the results indicate
conditional that all of these
variance process is generalizations are
built up statistically and
recursively in economically
GARCH significant.
estimation. The
recursive structure
of pit makes
the regime-
switching model
similar to a
GARCH model. In
a GARCH model,
successive
innovations are
drawn from
distributions with
different
(conditional)
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variances, and
these unobserved
ELTON PARULIAN SIREGAR (01011281520216)
conditional
variances follow a
recursive structure
with unknown
(estimated)
parameters. A
similar
interpretation - an
unobserved
parameter of the
conditional
distribution,
following a
recursive structure
- can
be given to Pit
here. The T-vector
of likelihood
function values
can be filled in
recursively in
exactly the same
way as for a
GARCH model.
This simplifies the
conditioning
process as all of
the information in
the past sequence
of regimes is
effectively
summarized by pt,
1.
2. Federal Glenn D. - Federal In this paper, Writer summarize Previous
Reserve Rudebusch. Reserve interest writer attempt to the above results researchers have
interest rate Journal of rate targeting explain these on the forecasting provided evidence
targeting, Monetary behavior disparate pieces of ability of various about the varying
rational Economics 35 - hypothesis of evidence on the yield ability of term
expectations, (1995) 245 274 rational predictive content spreads with four spreads to forecast
and the term expectations of the yield curve propositions about future interest
structure with an explicit the term structure: rates at different
model relating the TS1 Overnight horizons. This
term Spreads. Spreads paper shows
structure to the between the how these findings
behavior of the overnight Fed are consistent with
Fed. In the next funds rate and the hypothesis of
section, I briefly one-month or rational
survey the term three-month rates expectations
structure results. are good and reflect the
Section 3 then predictors of the manner in which
estimates a formal change from the Federal
model of the Fed's the current daily Reserve controls
interest rate to the average the Fed funds rate.
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rate targeting daily rate that will An empirical
behavior. This prevail over the model of Fed
ELTON PARULIAN SIREGAR (01011281520216)
model exhibits next one or three interest rate
three key months. targeting that is
attributes: (1) daily TS2 Short-Term estimated from
deviations of the Spreads. Spreads actual
spot Fed funds rate between very- data on target
from its target, (2) short-term bills - rates is employed.
gradual adjustment for Simulations of this
of example, 30-day model, which is
the target, and (3) and 60-day bills - augmented
persistent targets. are able to predict with a rational
This model is future changes in expectations term
inspired, in part, short rates at structure equation,
by the horizons of no demonstrate how
suggestions of more than one Fed
Cook and Hahn month. targeting behavior
(1989a, 1990) and TS3 Medium- accounts for the
Goodfriend Term Spreads. disparate term
(1991); here, Yield spreads structure results.
however, an involving bills
explicit model is with maturities
fit to actual data between
on Federal three and twelve
Reserve interest months have
rate essentially no
targets. Section 4 predictive
demonstrates how information
this empirical for future changes
model of interest in these rates.
rate targeting, TS4 Long-Term
even with the Spreads. Spreads
maintained involving long-
hypothesis of term bonds -
rational specifically,
expectations, can for maturities
explain longer than one or
the evidence on two years - appear
the varying to have some
predictive power predictive content
of the yield curve. for movements in
This explanation future interest
is, in essence, a rates.
rigorous empirical
generalization of
Mankiw and
Miron (1986).
The demonstration
of the link between
Fed behavior and
the predictive
content
of the term
structure is based
on synthetic
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interest rate data
generated from the
ELTON PARULIAN SIREGAR (01011281520216)
model. Estimating
the standard term
structure
regressions with
this synthetic
data allows me to
replicate the
various results
obtained with
actual data and,
more importantly,
to determine the
source of these
results. Finally,
Section 5
concludes with
speculation on
rationales for the
Fed's targeting
behavior.
3. An Empirical K. C. Chan; G. Models of the In this section, The results of the In this paper, we
Comparison of Andrew Karolyi; Short-Term describe the tests for one- compare eight
Alternative Francis A. Interest Rate econometric month Treasury competing models
Models of the Longstaff; approach used in bills indicate that it of short-term
Short-Term Anthony B. estimating is critical to model interest rate
Interest Rate Sanders. the parameters of volatility correctly. dynamics in order
The Journal of the interest rate The models that to determine
Finance, Vol. 47, models and in best describe the which model best
No. 3, Papers and examining their dynamics of fits the short-term
Proceedings of the explanatory interest rates over Treasury bill yield
Fifty-Second power for the time are those that data. All of the
Annual dynamic behavior allow the models are nested
Meeting of the of short-term conditional within a simple
American Finance interest rates. To volatility of framework that
Association, New illustrate interest rate allows us to
Orleans, the approach changes to be compare the
Louisiana January clearly, we focus highly dependent models directly to
3-5, 1992. (Jul., first on the on the level of the each other.
1992), pp. 1209- unrestricted interest rate.
1227. process given in Surprisingly, the
equation (1). The most commonly
same approach can used models
then be used for (Vasicek (1977)
the nested models and CIR SR
after (1985)) perform
imposing the poorly relative to
appropriate less well-known
parameter models such as
restrictions. Dothan (1978) and
CIR VR (1980).
We find that there
is no evidence of a
structural shift in
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the interest rate
process in October
ELTON PARULIAN SIREGAR (01011281520216)
1979 for the
models which
capture the
conditional
volatility of the
interest rate
process.
4. The sensitivity Jongmoo Jay -The sensitivity Following the it is noteworthy This paper has
of bank stock Choi, Elyas of a banks existing literature, that the market presented a multi-
returns to Elyasiani and discounted we use a risk premium is factor model of
market, Kenneth J. stream of profits multifactor model insignificant in bank stock rates of
interest and Kopecky*(Temple -stock returns to describe both the return. The
exchange rate University, are related to the returns on bank unexpected and assumed factors
risks Philadelphia, PA financial stocks. A micro actual value included the
19122 USA variables via a banking model in estimations. This market rate of
Received June market section 3 provides is due to the return, the
1991, final equilibrium a diffusion percentage
version received pricing theoretical basis of the market change in the
January 1992) relationship. for constructing factor by the short-term
empirical interest and domestic interest
hypotheses about exchange rate risk rate, and the
the magnitude factors within the percentage change
of the sensitivity context of a in the exchange
coefticients for multifactor model. rate. A micro
different classes of As Chen et al. model of an
banks and (1986) have international
alternative shown, the market banking firm
time periods. may be simply has also been
Assuming the US proxying for more presented to
dollar is the fundamental provide
numeraire economic predictions of the
currency, the variables. signs of the
following model coefficients
can be used to of the unexpected
describe the ex components of the
post nominal rate market, interest,
of return and exchange rate
on stocks, variables.
R=E+SF+t, (1) Regression
where R is a equations have
vector of the been estimated
nominal rate of that are based on
stock returns at these
time t, E is a unexpected values
vector of expected of the underlying
stock returns at factors. For
time t, F is a completeness, we
vector of risk have also
factors with estimated
mean zero and regressions based
unitary variance, S on actual values.
is a matrix of the The regressions
sensitivity have been
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coefficients to estimated with a
the risk factors, post-October 1979
ELTON PARULIAN SIREGAR (01011281520216)
and z is a vector of time dummy
idiosyncratic terms variable and with
which are mean a moneycenter
zero bank dummy
and serially variable. Standard
uncorrelated. results have been
While a multi- obtained for the
index model of market and
this type can be interest rate
estimated directly, variables while
the model has new results have
convenient been derived for
mathematical the
properties if the exchange rate
indices are variable.
orthogonal to each
other [see, e.g.,
Elton and Gruber
(1991, pp.
5. A Richard Stanton, -Structure In valuing First, second, and It is convenient to
Nonparametric (Haas School of Dynamics contingent claims, third order represent nancial
Model of Term Business And it is convenient to approximations to series, such as
Structure U.C. Berkeley - the Market represent the the drift, (rt), di interest rates, as
Dynamics January 30, 1997) Price of Interest underlying state usion, (rt), and continuous-time di
and the Rate Risk variable(s) market usion
Market Price as a continuous- price of interest processes,
of Interest time di rate risk, (rt), satisfying
Rate Risk usion process, together with stochastic di
satisfying a time- pointwise 95 erential equations
homogeneous percent condence of the form
stochastic di bands, are shown dXt = (Xt) dt +
erential in Figures 4 and (Xt) dZt : (63)
equation, 5.13 The rst thing However, the
dXt = (Xt) dt + to notice about specic parametric
(Xt) dZt : both gures is that forms selected for
the rst, and often re
second, and third ect considerations
order of
approximations all analytic
yield very similar tractability or
estimates, which is computational
what we convenience, more
would expect if the than any real
approximation economic
errors are as small motivation.
as the experiments Even for the short
above suggest. term riskless
interest rate, one
of the most
modeled series,
empirical tests
of existing models
have yielded
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disappointing
results. This
ELTON PARULIAN SIREGAR (01011281520216)
article presents a
technique for
nonparametrically
estimating
continuous-time di
usion processes
which are
observed only
at discrete time
intervals, and
illustrates the
methodology with
an application to
the term
structure of
interest rates.
6. Term Glenn D. -quarterly Many recent Numerous studies quarter. This
structure Rudebusch interest rate studies have have used partial adjustment
evidence on (Federal Reserve smoothing estimated models quarterly data to implies
interest rate Bank of San - The illusion of of central bank estimate monetary predictable future
smoothing and Francisco, monetary policy behavior. A policy rules or changes in the
monetary 101 Market Street, inertia evident sizable fraction of reaction functions policy rate over
policy inertia San Francisco, these that appear to horizons of
CA 94105, USA empirical policy exhibit a very slow several quarters,
August 2001) rules or reaction partial adjustment which does not
functions follow of the policy accord with the
Taylor (1993), interest rate. The lack of
who proposed a conventional information about
simple rule for wisdom asserts such
monetary policy that this gradual changes in
that sets the adjustment reflects financial markets.
quarterly average a policy inertia or This paper
level of the short- interest rate proposes a
term policy smoothing resolution of this
interest rate (it) behavior by empirical
in response to central banks. inconsistency by
(four-quarter) However, such providing an
inflation (t) and quarterly monetary alternative
the output gap (yt): policy inertia interpretation of
-it = r + t + would imply a the large lag
0.5(t large amount of coefficients in the
)+0.5yt, (1) forecastable estimated policy
-it = (1 variation rules.
1)(gt + gyyt) in interest rates at These coefficients
+ 1it1 + t, (2) horizons of more reflect serially
than three months, correlated or
which is persistent special
contradicted by factors or shocks
evidence from the that cause the
term structure of central bank to
interest rates. The deviate from the
illusion of policy rule.
monetary policy
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inertia evident in
the estimated
ELTON PARULIAN SIREGAR (01011281520216)
policy rules likely
reflects the
persistent shocks
that
central banks face.
7. New Evidence Thomas Laubach -Government The empirical this paper studies This study has
on the Interest (Board of debt, method used in the relationship shown that
Rate Effects Governors of the -government this paper is to between long- statistically
of Budget Federal Reserve deficits, regress expected horizon significant and
Deficits and System -interest rate future interest expected economically
Debt May 2003) regressions, rates on government debt plausible
- CBO projections and deficits, estimates of
projections, published by the measured by CBO the effects of
-OMB CBO and the and OMB government
projections. OMB for the projections, and deficits and debt
deficit-to-GDP expected future on interest rates
ratio and the long-term interest can be obtained by
debtto-GDP rates. The focusing on
ratio five years estimated effects long-horizon
ahead, as well as of government forecasts of future
other determinants debt and deficits or debt,
of long-term deficits on interest and future interest
interest rates rates are rates. The
suggested by statistically and projections of
economic theory. economically deficits and debt
As regards the significant: a one published by the
latter, the Ramsey percentage CBO and the
model of optimal point increase in OMB are arguably
growth, the projected among the best
combined with a deficit-to-GDP publicly
representative ratio is estimated 12
household with to raise long-term available forecasts
CES utility, interest rates by for these
implies that the net roughly 25 basis variables. The
real return points. Under effects of these
on capital, i.e. the plausible projections
real interest rate, is assumptions these manifest
determined by estimates themselves
r = g + are shown to be at the longer end
consistent with of the yield curve,
predictions of the as economic
neoclassical reasoning would
growth model. predict. All else
equal,
the results of this
study suggest that
interest rates rise
by about 25 basis
points in response
to a percentage
point increase in
the projected
deficit-to-GDP
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ratio, and by about
4 basis
ELTON PARULIAN SIREGAR (01011281520216)
points in response
to a percentage
point increase in
the projected debt-
to-GDP ratio.
8. Nominal Carmen Reinhart -Nominal Consider a small Exchange rate- The inclusion of
interest rates, and Carlos Vegh interest rates, open economy based stabilization money in
consumption (University of -consumption inhabited by a programs in consumption
booms , and Maryland, College booms large number of chronic-inflation decisions thus
lack of Park, Department identical, countries have improves the
credibility: A of Economics infinitely lived often models'
quantitative April 1995 ) individuals, who been accompanied ability to fit the
examination are blessed with by an initial data. Monetary
perfect foresight. expansion of models often yield
The representative private more plausible
consumer consumption parameter
maximizes followed by a estimates
Where is the contraction. This than their pure
discount factor (0 consumption cycle consumption
to 1); c denotes has been attributed counterparts and
consumption of to lack of generally perform
the only credibility, in the well in the
(nonstorable) sense that the overidentification
good; and (>0) is public views the tests that typically
the intertemporal reduction in the accompany the
elasticity of devaluation rate as estimation of
substitution. temporary. This rational-
paper expectations
assesses the models. For these
quantitative reasons, and
relevance of the because of the
'temporariness' monetary nature
hypothesis by of the underlying
comparing the 15
predictions of a theoretical
simple model to framework, the
the actual figures simulations that
for seven major follow will use,
programs. The whenever
paper possible, the
concludes that parameter
nominal interest estimates obtained
rates must fall from monetary
substantially for models.
the 'temporariness'
hypothesis to
account for an
important fraction
of the observed
consumption
booms.
9. Nonlinear -Gerard A. Pfann -Nonlinear Prior to tting and This paper In this paper we
Interest Rate University of Dynamics, estimating explores nonlinear have explored the
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Dynamics and Limburg -Term Structure threshold models dynamics for the scope of nonlinear
Implications -Peter C. of Interest Rates, to the short term time series of the dynamics in short
ELTON PARULIAN SIREGAR (01011281520216)
for the Term Schotman -SETAR interest rate in short term term interest
Structure Limburg Institute Models. section 3, this interest rate in the rates and its
of Financial section conducts a United States. The implications for
Economics simple data proposed model is the term structure.
-Rolf Tschernig exploration. The an autoregressive Our choice of
Humboldt data series in this threshold model SETAR models
University Berlin paper consists of augmented by was
September 1994 monthly conditional guided by the
observations of the heteroskedasticity. empirical analysis
US three months The performance of monthly three
T-bill rate and the of the model is months US T-bill
ten year evaluated by rates. We found
government bond considering its strong evidence
rate for the period implications for for the presence of
January 1962 the term two regimes with
through June structure of distinct dynamics
1990; they interest rates. The in the mean.
are shown in gure nonlinear Until interest rates
1.1 dynamics imply a reach double
Table 1 provides form of digits they behave
summary statistics nonlinearity like a random
of the level and rst in the levels walk. At higher
di relation between levels, however,
erence of the data the long and the they show a mean
series, with and short rate. reverting
without the in Empirical tendency. This is
uential period results indicate the main result
October 1979 that the implied from
through October nonlinearity is our time series
1982. A standard present in the data analysis of the
feature of the data nonlinear
is the extremely dynamics in
high kurtosis interest rates. In
of the rst di specifying the
erences, partly due nonlinear models
to we also accounted
heteroskedasticity. for the strong
The positive heteroskedasticity
skewness of the
levels is consistent
with the
unconditional
distribution
implied by the
Cox, Ingersoll
and Ross (1985)
model.
10. Testing the Herman J.Bierens Unit root, This paper is If our tests reject
unit root with 2 nonlinear trend, concerned with the unit root
drift Pennsylvania Chebishev testing the unit hypothesis this
hypothesis State University, polynomials root with drift should not be
against USA, and Tilburg hypothesis against automatically
nonlinear University, the a very general interpreted as
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trend Netherlands trend stationarity evidence in favor
stationarity, (November 1995) hypothesis, of the nonlinear
ELTON PARULIAN SIREGAR (01011281520216)
with an namely the trend stationarity
application to alternative that the hypothesis. As
the U.S. price time series is shown
level and stationary about an by Hassler and
interest rate almost Wolters (1995)
arbitrary and others, the
deterministic ADF and Phillips-
function of time. Perron (1988)
Our approach tests of the unit
employs the fact root
that any function with drift
of time can be hypothesis may
approximated also have some
arbitrarily closely power against
by a linear other alternatives
function of than linear trend
Chebishev stationarity,
polynomials. We for example the
propose various alternative that the
tests on the basis process is
of an Augmented fractionally
Dickey-Fuller integrated. The
auxiliary same may apply to
regression with our tests.
linear and
nonlinear
deterministic
trends, where the
nonlinear
deterministic trend
is approximated by
detrended
Chebishev
time polynomials.
Also, we propose a
model-free test.
We apply our tests
to the GNP
deflator, the
consumer price
index, and the
interest rate for the
USA, taken from
the extended
Nelson-Plosser
data
set. The results
indicate that these
series are
nonlinear trend
stationary.