Federal Funds Rate Prediction

Lucio Sarno, Daniel Thornton and Giorgio Valente ()

No 4587, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the forecasting performance of a range of time-series models of the daily US effective federal funds (FF) rate recently proposed in the literature. We find that: (i) most of the models and predictor variables considered produce satisfactory one-day-ahead forecasts of the FF rate; (ii) the best forecasting model is a simple univariate model where the future FF rate is forecast using the current difference between the FF rate and its target; (iii) combining the forecasts from various models generally yields modest improvements on the best performing model. These results have a natural interpretation and clear policy implications.

Keywords: E47; Federal fund rate; Forecasting; Term structure; Nonlinearity (search for similar items in EconPapers)
JEL-codes: E43 (search for similar items in EconPapers)
Date: 2004-09
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-mac and nep-mon
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Federal Funds Rate Prediction (2005)
Working Paper: Federal funds rate prediction (2004)
Working Paper: Federal Funds Rate Prediction (2003)
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