Forecasts of US short-term interest rates: A flexible forecast combination approach

Massimo Guidolin () and Allan Timmermann

Journal of Econometrics, 2009, vol. 150, issue 2, pages 297-311

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.

Keywords: Forecast; combinations; Regime; switches; Short; term; interest; rates; Expectations; hypothesis (search for similar items in EconPapers)
Date: 2009

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Related works:
Working Paper: Forecasts of US Short-term Interest Rates: A Flexible Forecast Combination Approach (2007)
Working Paper: Forecasts of U.S. short-term interest rates: a flexible forecast combination approach (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:econom:v:150:y:2009:i:2:p:297-311

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