Uncertainty and dispersion in professional interest rate forecasts: International evidence and theory

Alex Cukierman and Thomas Lustenberger

No 15039, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the cross-country relationships between measures of forecast uncertainty, forecast dispersion across individual forecasters and the variabilities of short-term interest rates and long-term yields. The main findings are: (i) Forecast uncertainty and forecast dispersion are positively and significantly related across countries for both short-term interest rates and long-term yields. (ii) A positive, albeit weaker, relation is found between forecast uncertainty and interest rate variability. (iii) Forecast dispersion of short-term interest rates and rates' variability are also positively associated. The evidence is followed by a Bayesian learning model that discusses conditions under which the results above are implied by theory.

Keywords: Forecast dispersion; Uncertainty; Variability; Private noisy information; Public information (search for similar items in EconPapers)
JEL-codes: D8 E4 G0 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-mac
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