Revisiting the expectations hypothesis of the term structure of interest rates

The expectations hypothesis of the term structure has been decisively rejected in a large empirical literature that spans several decades. In this paper, using a newly constructed dataset of synthetic zero-coupon bond yields, we show that evidence against the expectations hypothesis is substantially weaker in data generated after the widespread publicity of its failure. These results are consistent with the idea that asset pricing anomalies tend to disappear once they are widely recognized.     

Global reserve currency system: Why will the dollar standard give way to a tripolar currency order?

The recent financial crisis highlighted some of the underlying defects in the dollar-based reserve system. This paper argues that the era of the US hegemonic stability and unipolarity, which provided the foundation for the dollar’s sustenance as the pre-eminent global reserve currency, has already peaked and the global economy of the future will revolve around a multipolar order. The rise of China, along with other emerging markets, is rapidly redrawing the traditional Western dominated global economic system. The structural challenges facing the American economy along with the extraordinary expansion of Federal Reserve’s balance sheet and the explosion of the US government debt will diminish the attractiveness of the dollar standard going forward. Our analysis suggests that a tripolar currency order—consisting of the dollar, the yuan and the euro—will replace the dollar standard in the coming decades.