Research Discussion Papers, Bank of Finland
No 19/1996:
The Term Structure of Interest Rates: Estimation and Interpretation
Juha Seppälä and Petri Viertiö
Abstract: This document reports the currently used term structure
estimation method at the Bank of Finland and discusses interpretation of
the results it generates. We start by introducing two widely used term
structure estimation methods: the Cubic Spline Function method and the
Nelson-Siegel approach. We compare their results, paying special attention
to the smoothness of forward interest rates and distribution of pricing
errors. Next, we introduce the Bank of Finland's method, commenting on its
strengths and weaknesses. Finally, we discuss interpretation of the term
structure of interest rates with emphasis on the inflation expectations and
the role of the time-varying risk premia.
Keywords: term structure of interest rates; cubic splines; Nelson-Siegel; forward interest rates; relative value; inflation expectations; time-varying risk premia; (follow links to similar papers)
59 pages, September 5, 1996
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
DP_19_1996.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
