Forecasting Interest Rates over the Long Run

Tobias Adrian, Richard Crump, Peter Diamond and Rui Yu

No 20160718, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: In a previous post, we showed how market rates on U.S. Treasuries violate the expectations hypothesis because of time-varying risk premia. In this post, we provide evidence that term structure models have outperformed direct market-based measures in forecasting interest rates. This suggests that term structure models can play a role in long-run planning for public policy objectives such as assessing the viability of Social Security.

Keywords: social security; discounting; term structure of interest rates; term premiums (search for similar items in EconPapers)
JEL-codes: D1 G1 H0 (search for similar items in EconPapers)
Date: 2016-07-18
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