Discussion Paper
Forecasting Interest Rates over the Long Run
Abstract: In a previous post, we showed how market rates on U.S. Treasuries violate the expectations hypothesis because of time-varying risk premia. In this post, we provide evidence that term structure models have outperformed direct market-based measures in forecasting interest rates. This suggests that term structure models can play a role in long-run planning for public policy objectives such as assessing the viability of Social Security.
Keywords: social security; discounting; term structure of interest rates; term premiums;
JEL Classification: D1; G1; H0;
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2016-07-18
Number: 20160718