Federal funds rate prediction
Sarno, Lucio, Thornton, Daniel L. and Valente, Giorgio (2004) Federal funds rate prediction. Discussion Paper. London: Centre for Economic Policy Research (Great Britain). Discussion paper (Centre for Economic Policy Research (Great Britain)) (No.458).
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We examine the forecasting performance of a range of time-series models of the daily US effective federal funds (FF) rate recently proposed in the literature. We find that: (i) most of the models and predictor variables considered produce satisfactory one-day-ahead forecasts of the FF rate; (ii) the best forecasting model is a simple univariate model where the future FF rate is forecast using the current difference between the FF rate and its target; (iii) combining the forecasts from various models generally yields modest improvements on the best performing model. These results have a natural interpretation and clear policy implications.
|Item Type:||Working or Discussion Paper (Discussion Paper)|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||Faculty of Social Sciences > Warwick Business School|
|Library of Congress Subject Headings (LCSH):||Federal funds market (United States), Economic forecasting -- United States, Nonlinear theories, Time-series analysis|
|Series Name:||Discussion paper (Centre for Economic Policy Research (Great Britain))|
|Publisher:||Centre for Economic Policy Research (Great Britain)|
|Place of Publication:||London|
|Official Date:||September 2004|
|Number of Pages:||35|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
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