A note on nonlinear dynamics in the Spanish term structure of interest rates

This note applies the methodology to test for threshold cointegration recently proposed by Hansen and Seo (2002) [Hansen, B. E. & Seo, B., (2002). Testing for two-regime threshold cointegration in vector error-correction models. Journal of Econometrics, 110, 293-318] to the Spanish term structure of interest rates during the period 1980:1-2002:12. The evidence suggests that nonlinear cointegration between long and short interest rates is clearly rejected, so that a linear cointegration model would provide an adequate empirical description for the Spanish term structure of interest rate.