Working Paper
Forecasts of U.S. short-term interest rates: a flexible forecast combination approach
Abstract: This paper develops a flexible approach to combine forecasts of future spot rates with forecasts from time-series models or macroeconomic variables. We find empirical evidence that accounting for both regimes in interest rate dynamics and combining forecasts from different models helps improve the out-of-sample forecasting performance for US short-term rates. Imposing restrictions from the expectations hypothesis on the forecasting model are found to help at long forecasting horizons.
https://doi.org/10.20955/wp.2012.030
Access Documents
File(s): File format is application/pdf https://s3.amazonaws.com/real.stlouisfed.org/wp/2012/2012-030.pdf
Authors
Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2007
Number: 2005-059