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Forecasts of U.S. short-term interest rates: a flexible forecast combination approach

Massimo Guidolin () and Allan Timmerman

No 2005-059, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper develops a flexible approach to combine forecasts of future spot rates with forecasts from time-series models or macroeconomic variables. We find empirical evidence that accounting for both regimes in interest rate dynamics and combining forecasts from different models helps improve the out-of-sample forecasting performance for US short-term rates. Imposing restrictions from the expectations hypothesis on the forecasting model are found to help at long forecasting horizons.

Keywords: Interest rates; Forecasting (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-mac
Date: 2007
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Related works:
Journal Article: Forecasts of US short-term interest rates: A flexible forecast combination approach (2009) Downloads
Working Paper: Forecasts of US Short-term Interest Rates: A Flexible Forecast Combination Approach (2007) Downloads
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