Short-end slope $\lim_{t\to 0}\partial y(t)/\partial t$

For the particular form of $A^\star$ under specification EFM(2) the short-end slope becomes

$$\lim_{t\to 0}\frac{\partial y(t)}{\partial t} = - {1\ove... ...star}^\prime\,e_1 = \frac{\kappa_r^\star}{2}\,(x-r)\quad ,$$ (65)

i.e. a risk-free rate $r$ below the medium-term mean ('target') $x$ means a upward sloping money-market curve. This makes economic sense since, in the medium term, in that case the short rate is expected to rise. In EFM(2) the slope of the money-market curve is proportional to the divergence between the short rate and the mid-term target.