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Forecasting changes in UK interest rates

โœ Scribed by Tae-Hwan Kim; Paul Mizen; Thanaset Chevapatrakul

Publisher
John Wiley and Sons
Year
2008
Tongue
English
Weight
199 KB
Volume
27
Category
Article
ISSN
0277-6693

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โœฆ Synopsis

Abstract

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 committee 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 analyse the predictive ability of two information sets, we find that the approach has predictive ability both inโ€sample and outโ€ofโ€sample that helps forecast the direction of future rates.โ€ƒCopyright ยฉ 2008 John wiley & Sons, Ltd.

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