Federal funds rate prediction

Lucio Sarno (), Daniel Thornton () and Giorgio Valente ()

No 2002-005, Working Papers from Federal Reserve Bank of St. Louis

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: Federal funds rate; Forecasting (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fin and nep-mon
Date: Written
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Related works:
Working Paper: Federal Funds Rate Prediction (2003)
Working Paper: Federal Funds Rate Prediction (2004)
Working Paper: Federal Funds Rate Prediction (2004)
Journal Article: Federal Funds Rate Prediction (2005)
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