Term Structure Estimation with Survey Data on Interest Rate Forecasts
Athanasios Orphanides () and
Don H. Kim ()
Additional contact information
Don H. Kim: Division of Monetary Affairs Federal Reserve Board
No 474, Computing in Economics and Finance 2005 from Society for Computational Economics
The estimation of dynamic term structure models with flexible specification of market price of risk is beset by a severe small-sample problem arising from the highly persistent nature of interest rates. We propose to use survey data on the forecast of short-term interest rates as an additional input in the estimation to overcome the problem. The 3-factor pure-Gaussian model, thus estimated with the US Treasuries term structure for the 1990-2004 period, generates a stable estimate of expected path of the short-term interest rate, reproduces the well-known stylized patterns in the expectations hypothesis tests, and captures a large part of the short-run variations in the survey forecast of changes in longer-term interest rates
JEL-codes: G (search for similar items in EconPapers)
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Journal Article: Term Structure Estimation with Survey Data on Interest Rate Forecasts (2012)
Working Paper: Term Structure Estimation with Survey Data on Interest Rate Forecasts (2005)
Working Paper: Term structure estimation with survey data on interest rate forecasts (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf5:474
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