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We examine the term structure of interest rates for the United States, Germany, and Japan over the period 1982–2000, using a nonlinear multivariate vector equilibrium correction‐modeling framework that allows for asymmetric adjustment and regime shifts. The model has a very general underlying theoretical rationale that allows for time‐varying term premia and other short‐run deviations from the expectations model of the term structure. The empirical models fit well, display regime switches closely correlated with key monetary policy variables, and have good forecasting properties.