This paper examines the dynamic adjustment to long-run relationship between Taiwan?s government bond interest rates with different maturities. We employ a methodology that permits threshold and the momentum-threshold adjustment towards equilibrium. To compare with past research, we assume that the dynamic adjustment of yield spreads in different maturity bonds. Our results support the expectations hypothesis of the term structure of interest rate with dynamic adjustment using Taiwan interest rates. It maybe erroneous by using symmetry adjustment assumption to build the term structure of interest rates. Furthermore, when interest was down, we find asymmetric price transmissions between different maturity bonds in the short and long run. But it was not done when interest was up.
