Forecasting Term Structure of Interest Rates in Japan

Hokuto Ishii
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Hokuto Ishii: Graduate School of Economics, Nagoya University, Furo-cho, Chikusa-ku, Nagoya 464-8601, Japan

IJFS, 2019, vol. 7, issue 3, 1-35

Abstract: In this paper, we examined and compared the forecast performances of the dynamic Nelson–Siegel (DNS), dynamic Nelson–Siegel–Svensson (DNSS), and arbitrage-free Nelson–Siegel (AFNS) models after the financial crisis period. The best model for the forecast performance is the DNSS model in the middle and long periods. The AFNS is inferior to the DNS model for long-period forecasting. In U.S. bond markets, AFNS is shown to be superior to DNS in the U.S. However, for Japanese data, there is no evidence that the AFNS is superior to the DNS model in the long forecast horizon.

Keywords: dynamic Nelson–Siegel; arbitrage-free Nelson–Siegel; affine term structure; forecasting (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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