Testing the Expectations Hypothesis of Interest Rate Term Structure in Kuwait
Journal of Economic and Administrative Sciences
ISSN: 1026-4116
Article publication date: 1 June 2010
Abstract
This paper investigates the validity of the expectations hypothesis for the term structure of interest rates in the context of the deposit interest rates in Kuwait. The data set covers average inter local bank interest rates on deposits of Kuwaiti Dinar (KD) with maturity of one, three and six months from the period June 1994 to August 2008. We utilize Johansen procedures to examine the relationship between spot and forward rates. Our findings show that the spot and forward rates are cointegrated for all cases, the one month interest rates, the three month interest rates as well as the six month interest rates. The explanation of this relationship indicates that the expectations hypothesis of the term structure of interest rates is accepted for the case of Kuwait.
Keywords
Citation
Al‐Shammari, N., KhalifaGhali, ReyadhFaras and Al‐Salman, A. (2010), "Testing the Expectations Hypothesis of Interest Rate Term Structure in Kuwait", Journal of Economic and Administrative Sciences, Vol. 26 No. 1, pp. 78-99. https://doi.org/10.1108/10264116201000004
Publisher
:Emerald Group Publishing Limited
Copyright © 2010, Emerald Group Publishing Limited