Term Structure Estimation with Survey Data on Interest Rate Forecasts

Athanasios Orphanides and Don H. Kim ()
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Don H. Kim: Division of Monetary Affairs Federal Reserve Board

No 474, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: 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)
Date: 2005-11-11
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Citations: View citations in EconPapers (119)

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Related works:
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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