Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
999612 | International Journal of Forecasting | 2013 | 11 Pages |
Abstract
The forward rate can deliver accurate forecasts of euro area short-term interest rates, depending on the time period. During periods of macroeconomic uncertainty, forecasts obtained from a model of yield and macro factors are more accurate than forward-based forecasts. We provide evidence that a time-varying forward premium explains the variation in the forecasting performance. We develop a method for computing forward premium confidence intervals to identify ex-ante periods during which forward-based forecasts are inaccurate.
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Authors
Ana Beatriz Galvao, Sonia Costa,