Academic journal article The Reserve Bank of New Zealand Bulletin

Reserve Bank Discussion Papers

Academic journal article The Reserve Bank of New Zealand Bulletin

Reserve Bank Discussion Papers

Article excerpt

This section sets out the abstracts of recently issued Reserve Bank Discussion Papers. The Discussion Papers are available on the Reserve Bank web site and can be obtained in hard copy on request from the Reserve Bank.

DP 2003/07

Estimates of time-varying term premia for New Zealand and Australia

Matthew Shapiro

Forward rates in the money market are systematically higher than realised spot rates, reflecting an unobservable term premium. This paper uses a Kalman filter specification to produce time-varying estimates of the term premia in New Zealand and Australia. Three time series specifications are used to examine the properties of the premia, such as the average size, volatility, and the degree of mean reversion.

Compared to the constant term premia estimates, the time-varying estimates explain significantly more of the difference between forward and spot rates. The results suggest that the premium in New Zealand is slowly mean-reverting, while the Australian premium reverts quickly to the mean.

It is not clear whether the method of monetary policy implementation affects the term premium, although in New Zealand the premium has been smaller and less variable since the introduction of the Official Cash Rate in March 1999. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.