Estimation of the temporary structure of interest rates: based on public debt information provided by Bank of Spain

Abstract

The aim of this work is to estimate the temporary structure of interest rate (ETTI), based on the information on public debt provided by the Bank of Spain, applying the Nelson and Siegel (1987) model. Moreover, as additional targets, it will be discussed the different theoretical macroeconomic and financial methodologies and approaches used to estimate the ETTI over the years. Nelson and Siegel methodology will be explained as the reasons why it is the chosen method of estimation. In addition, this work goes beyond the knowledge acquired with the degree in Business Administration, deepening in complex concepts like the temporary structure of interest rates itself. Furthermore, due to actual financial crisis, it has been decided to choose two periods of time (2006 and 2011) in order to be able to compare the changes happened in ETTI between pre-crisis period and in-crisis one.