New model predicts interest rate shifts, revolutionizing bond market dynamics!
The article explores how short-term interest rates behave using a special model called SETAR. This model shows that short-term interest rates can change in a non-linear way, affecting long-term rates differently. By comparing this model to a simpler one, the researchers found that the SETAR model better matches real-world data for Germany and the US. This helps us understand how interest rates influence the overall term structure of interest rates.