THE INFORMATION IN SWEDISH SHORT-MATURITY FORWARD RATES

In this paper we empirically study the relationship between implicit forward rates and corresponding interest rates in the short-end of the Swedish term structure. The interest rates and forward rates seem to be integrated of order one and cointegrated. We find that the forward rates, for all maturities, contain information about future interest rates. Further, in contrast to previous empirical studies we cannot reject the joint hypothesis of rational expectations and no term premium. However, the results should be treated with caution since we also find parameter instability.