EconPapers    
Economics at your fingertips  
 

Which Model to Forecast the Target Rate?

Maarten van Oordt

Staff Working Papers from Bank of Canada

Abstract: Specifications of the Federal Reserve target rate that have more realistic features mitigate in-sample over-fitting and are favored in the data. Imposing a positivity constraint and discrete increments significantly increases the accuracy of model out-of-sample forecasts for the level and volatility of the Federal Reserve target rates. In addition, imposing the constraints produces different estimates of the response coefficients. In particular, a new and simple specification, where the target rate is the maximum between zero and the prediction of an ordered-choice Probit model, is more accurate and has higher response coefficients to information about inflation and unemployment.

Keywords: Financial markets; Interest rates (search for similar items in EconPapers)
JEL-codes: E43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2017/12/swp2017-60.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:17-60

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-04-29
Handle: RePEc:bca:bocawp:17-60