 Futures Contract Rates as Monetary Policy ForecastsGiuseppe Ferrero and Andrea Nobili International Journal of Central Banking, 2009, vol. 5, issue 2, 109-145 Abstract: The prices of futures contracts on short-term interest rates are commonly used by central banks to gauge market expectations concerning monetary policy decisions. Excess returns - the difference between futures rates and the realized rates - are positive, on average, and statistically significant, both in the euro area and in the United States. We find that these biases are significantly related to the business cycle only in the United States. Moreover, the sign and the significance of the estimated relationships with business-cycle indicators are unstable over time. Breaking the excess returns down into risk-premium and forecast-error components, we find that risk premia are countercyclical in both areas. On the contrary, ex post prediction errors, which represent the greater part of excess returns at longer horizons in both areas, are negatively correlated with the business cycle only in the United States. JEL-codes: E43 E44 E52 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2009:q:2:a:4 Access Statistics for this article International Journal of Central Banking is currently edited by Loretta J. Mester More articles in International Journal of Central Banking from International Journal of Central Banking |
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