Forecasting the yield curve with macroeconomic information - evidence from European markets

Isabel Maldonado, Carlos Pinho, Francisco Rodríguez De Prado and Carla Azevedo Lobo

International Journal of Banking, Accounting and Finance, 2021, vol. 12, issue 2, 177-200

Abstract: In this paper we analyse the predictive content of the introduction of macroeconomic variables in term structure dynamic models. We tested the dynamic models using data from the public debt, inflation rate and annual variation of the industrial production index for four European countries: Portugal, Spain, the UK and Germany. Results obtained for the period from January 1990 to December 2012 indicate that considering macroeconomic factors makes a positive contribution to the improvement of forecasts for different countries and maturities. However, the paper presents evidence of time-varying forecast accuracy, not only across yield maturities and forecast horizons, but also over data sub-periods.

Keywords: yield curve; dynamic factor models; forecasting; out-of-sample forecasting evaluations. (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ids:injbaf:v:12:y:2021:i:2:p:177-200

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