Testing for long-range dependence in the Brazilian term structure of interest rates

• Autor(a) principal: Cajueiro, Daniel Oliveira
• Data de Publicação: 2009
• Outros Autores: Tabak, Benjamin Miranda
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional da UCB
• Texto Completo: http://twingo.ucb.br:8080/jspui/handle/10869/327; https://repositorio.ucb.br:9443/jspui/handle/123456789/7550

This paper presents empirical evidence of fractional dynamics in interest rates for different maturities for Brazil. A variation of a newly developed test for long-range dependence, the V/S statistic, with a post-blackening bootstrap is employed. Results suggest that Brazilian interest rates possess strong long-range dependence in volatility, even when considering the structural break in 1999. These findings imply that the development of policy models that give rise to long-range dependence in interest rates’ volatility could be very useful. The long–short-term interest rates spread has strong long-range dependence, which suggests that traditional tests of expectation hypothesis of the term structure of interest rates may be misspecified.