Extracting expectations of New Zealand's Official Cash Rate from the bank-risk yield curve

Leo Krippner

No DP2002/01, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: The hypothesis that a forward term-premium (FTP) exists between forward 1- day rates calculated from the New Zealand bank-risk yield curve and the corresponding ex-post Official Cash Rate (OCR) is tested by applying a single equation method for a cointegrated system to daily data from March 1999 to December 2001. The results indicate that the FTP is statistically significant for all forward horizons tested. The results also indicate that the estimates of the FTP appear to be an increasing function of the forward horizon, and the FTP may be tentatively represented as a simple monotonically-increasing analytical function. The model may be used in reverse to imply current ex-ante expectations of the OCR.

JEL-codes: C2 E43 E44 (search for similar items in EconPapers)
Pages: 35p
Date: 2002-03
New Economics Papers: this item is included in nep-cba, nep-fmk and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbdps:2002/01

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