This thesis consists of four empirical essays, summarized below.

In “On Alternative Interest Rate Processes'' the interest rate dynamics for four European countries are studied. There seems to be a positive relation between the interest rate level and the volatility of interest rate changes. It is found that mean-reversion plays an important role for the specification of the dynamics. These results seem to be robust to the use of different moment conditions, and simulations of the estimated models reveal that they do fairly well in capturing non-fitted moments as well. The small sample properties of the generalized method of moments estimators are also studied through simulations.

“Regime-Switching and Interest Rates in the European Monetary System" examines the effect of exchange rate target zones on the dynamics of short-term interest rates. It is shown that the regime-switching model developed is able to capture the behavior of interest rates for countries in the European Monetary System around target zone realignments. The regimes are interpreted in terms of ‘non-credible/speculative attack’ and ‘credible system’ regimes. The switching probabilities are allowed to be state-dependent, and the model is used to examine questions relating to the likelihood of realignments and the stability of the target zone system.

In “Conditional Forward Term Premia: Some International Evidence" nominal forward term premia are examined on an international data set for the post-Bretton Woods period. The average magnitude for some of the premia has been small, but it is shown that there are statistically and economically significant conditional premia. The expectations hypothesis is thus rejected, but a conditional version of the liquidity preference hypothesis is consistent with data. Finally, the use of the yield curve for extracting information about the future path of variables relevant to monetary policy is discussed.

“The Information in Swedish Short-Maturity Forward Rates" studies the relationship between implicit forward rates and corresponding spot 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. The forward rates contain information about future interest rates for all combinations of horizons and maturities studied. Further, in contrast to previous empirical studies, the joint hypothesis of rational expectations and no term premium cannot be rejected.