Forecasting Changes in UK Interest Rates
Thanaset Chevapatrakul (),
Tae-Hwan Kim () and
Paul Mizen ()
Discussion Paper Series from Department of Economics, Loughborough University
Making accurate forecasts of the future direction of interest rates is a vital element when making economic decisions. The focus on central banks as they make decisions about the future direction of interest rates requires the forecaster to assess the likely outcome of comittee decisions based on new information since the previous meeting. We characterize this process as a dynamic ordered probit process that uses information to decide between three possible outcomes for interest rates: an increase, decrease or no-change. When we analyze the predictive ability of two information sets, we find that the approach has predictive ability both in-sample and out-of-sample that helps forecast the direction of future rates.
Keywords: Interest rates; monetary policy; Bank of England (search for similar items in EconPapers)
JEL-codes: E47 E52 (search for similar items in EconPapers)
Date: 2007-11, Revised 2007-11
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Journal Article: Forecasting changes in UK interest rates (2008)
Working Paper: Forecasting Changes in UK Interest Rates (2007)
Working Paper: Forecasting changes in UK interest rates (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:lbo:lbowps:2007_26
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