Forecasting the Government Bond Term Structure in Australia

Rui Chen, Jiri Svec and Maurice Peat

Australian Economic Papers, 2016, vol. 55, issue 2, 99-111

Abstract: type="main">

In this paper, we evaluate the performance of the dynamic Nielsen and Siegel interest rate model in forecasting Australian government bond yields. We compare a two-stage OLS estimation procedure to a more powerful and robust state-space framework estimated via a Kalman filter. We show that the one-step approach generates smaller forecast errors than the two-step procedure or a benchmark random walk model when forecasting the Australian government term structure across various horizons.

Date: 2016
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