Testing the expectations hypothesis for interest rate term structure : some Australian evidence

Many test results are found inconsistent with the expectations hypothesis of the term structure. The aim of this paper is to re-examine the expectations hypothesis of the term structure using the Australian interest rate data from 1969(7) to 1995(7). We start with the cointegration test on <i>R</i>_t, <i>r</i>_t, and <i>S</i>_t followed by the Granger causality test from <i>S</i>_t to ∇ <i>r</i>_t. Finally we carry out the VAR model of cross-equation restrictions test. Our findings show that there is no conclusive rejection of the expectations hypothesis of the term structure.<br>