This paper tests the Expectations Hypothesis (EH) of the term structure of interest rates using n... more This paper tests the Expectations Hypothesis (EH) of the term structure of interest rates using new data for Germany. The German term structure appears to forecast future short-term interest rates surprisingly well, compared with previous studies with US data, while it has lower predictive power for longterm interest rates. However, the direction suggested by the coefficient estimates is consistent with that implied by the EH, that is when the term spread widens, long rates increase. The use of instrumental variables to deal with possible measurement errors in the data significantly improves regressions for the long rates. Moreover, reestimation with proxy variables to account for the possibility of time-varying term premia confirms that the evolution of both short and long rates corresponds to the predictions of the EH and that most of the information is in the term spread. These results are important as they suggest that monetary policy in Germany could be guided by the slope of t...
The aim of the present paper is to assess the role of short rate predictability and monetary poli... more The aim of the present paper is to assess the role of short rate predictability and monetary policy in explaining different results from tests of the Expectations Hypothesis of the term structure. For this purpose McCallum (1994b) model for the interaction between the Expectations Hypothesis, a timevarying term premium and a policy reaction to the term spread is estimateci using Eurorates for 8 countries in different subperiods between 1985 and 1995. The estimation is performed following Kugler (1997) modification of McCallum model. The results confirm previous findings by Kugler and suggest the important role played by monetary policy in explaining the empirica! performance ofthe Expectation Hypothesis.
SIGLEAvailable from British Library Document Supply Centre-DSC:3597.810(NU-DE-DP--91/10) / BLDSC ... more SIGLEAvailable from British Library Document Supply Centre-DSC:3597.810(NU-DE-DP--91/10) / BLDSC - British Library Document Supply CentreGBUnited Kingdo
Page 1. Journal of Forecasting, Vol. 9, 13-24 (1990) Comparing Ex-ante Forecasts from a SEM and V... more Page 1. Journal of Forecasting, Vol. 9, 13-24 (1990) Comparing Ex-ante Forecasts from a SEM and VAR Model: an Application to the Italian Economy GIANNA BOER0 Universita di Cagliari, Italy ABSTRACT The predictive performance ...
Page 1. Gianna Boero Università di Cagliari, CRENoS e University of Warwick E-mail: boero@unica.i... more Page 1. Gianna Boero Università di Cagliari, CRENoS e University of Warwick E-mail: boero@unica.it Emanuela Marrocu Università di Cagliari e CRENoS E-mail: emarrocu@unica.it LA PERFORMANCE DI MODELLI NON ...
Page 1. 1 Gianna Boero CRENoS, University of Cagliari, and University of Warwick E-mail: boero@un... more Page 1. 1 Gianna Boero CRENoS, University of Cagliari, and University of Warwick E-mail: boero@unica.it Costanza Torricelli University of Modena E-mail: torricelli@unimo.it THE INFORMATION IN THE TERM STRUCTURE OF INTEREST RATES: ...
The aim of this paper is to compare the forecasting performance of SETAR and GARCH models against... more The aim of this paper is to compare the forecasting performance of SETAR and GARCH models against a linear benchmark using historical data for two bilateral dollar exchange rates, namely the Japanese Yen and the British Pound. The analysis is carried out with series sampled at weekly and daily frequencies. The relative performance of the models is evaluated on point forecasts and interval forecasts. Point forecasts evaluation tends to favour on average the linear models, though the analysis produces some evidence of forecasting gains from nonlinear models in sub-samples characterised by stronger non-linearity. Evaluation of interval forecasts clearly favours the GARCH models and shows that they are more accurate than the AR and SETAR models, especially at forecasting events in the tail regions of the distribution. JEL Codes: F31, F37
In recent years there has been a considerable development in modelling non-linearities and asymme... more In recent years there has been a considerable development in modelling non-linearities and asymmetries in economic and financial variables. The aim of this work is to compare the forecasting performance of different models for the returns of some of the most traded exchange rates in terms of the US dollar, namely the French franc (FF/$), the German mark (DM/$) and the Japanese yen (Y/$. We compare the relative performance of some nonlinear models and contrast them with their linear counterparts. Although we find evidence of some forecasting gains from nonlinear models, the results are sensitive to the forecast horizon and to the metric adopted to measure the forecasting accuracy. The use of data at different frequencies allows us to evaluate the possible effects of temporal aggregation. JEL Codes: F31, F37, C53 Keywords: Exchange Rates, Forecasting, Modeling
The aim of this paper is to evaluate the impact of monetary policy in tests of the Expectations H... more The aim of this paper is to evaluate the impact of monetary policy in tests of the Expectations Hypothesis of the term structure of interest rates. We apply the model developed by McCallum (1994b), in which the Expectations Hypothesis interacts with a policy reaction function and with a time-varying term premium, to eight countries with different monetary policy stances, within the period 1985 to 1995. The results suggest the importance of the treatment of monetary policy in explaining the empirical performance of the Expectations Hypothesis. Amongst other results, we also find that the model performs better for some countries than others depending upon the monetary policy stance adopted
The properties of Pearson's goodness-of-fit test, as used in density forecast evaluation, inc... more The properties of Pearson's goodness-of-fit test, as used in density forecast evaluation, income distribution analysis and elsewhere, are analysed. The components-of-chi-squared or "Pearson analog" tests of Anderson (1994) are shown to be less generally applicable than was originally claimed. For the case of equiprobable classes, where the general components tests remain valid, a Monte Carlo study shows that tests directed towards skewness and kurtosis may have low power, due to differences between the class boundaries and the intersection points of the distributions being compared. The power of individual component tests can be increased by the use of nonequiprobable classes.
This paper tests the Expectations Hypothesis (EH) of the term structure of interest rates using n... more This paper tests the Expectations Hypothesis (EH) of the term structure of interest rates using new data for Germany. The German term structure appears to forecast future short-term interest rates surprisingly well, compared with previous studies with US data, while it has lower predictive power for longterm interest rates. However, the direction suggested by the coefficient estimates is consistent with that implied by the EH, that is when the term spread widens, long rates increase. The use of instrumental variables to deal with possible measurement errors in the data significantly improves regressions for the long rates. Moreover, reestimation with proxy variables to account for the possibility of time-varying term premia confirms that the evolution of both short and long rates corresponds to the predictions of the EH and that most of the information is in the term spread. These results are important as they suggest that monetary policy in Germany could be guided by the slope of t...
The aim of the present paper is to assess the role of short rate predictability and monetary poli... more The aim of the present paper is to assess the role of short rate predictability and monetary policy in explaining different results from tests of the Expectations Hypothesis of the term structure. For this purpose McCallum (1994b) model for the interaction between the Expectations Hypothesis, a timevarying term premium and a policy reaction to the term spread is estimateci using Eurorates for 8 countries in different subperiods between 1985 and 1995. The estimation is performed following Kugler (1997) modification of McCallum model. The results confirm previous findings by Kugler and suggest the important role played by monetary policy in explaining the empirica! performance ofthe Expectation Hypothesis.
SIGLEAvailable from British Library Document Supply Centre-DSC:3597.810(NU-DE-DP--91/10) / BLDSC ... more SIGLEAvailable from British Library Document Supply Centre-DSC:3597.810(NU-DE-DP--91/10) / BLDSC - British Library Document Supply CentreGBUnited Kingdo
Page 1. Journal of Forecasting, Vol. 9, 13-24 (1990) Comparing Ex-ante Forecasts from a SEM and V... more Page 1. Journal of Forecasting, Vol. 9, 13-24 (1990) Comparing Ex-ante Forecasts from a SEM and VAR Model: an Application to the Italian Economy GIANNA BOER0 Universita di Cagliari, Italy ABSTRACT The predictive performance ...
Page 1. Gianna Boero Università di Cagliari, CRENoS e University of Warwick E-mail: boero@unica.i... more Page 1. Gianna Boero Università di Cagliari, CRENoS e University of Warwick E-mail: boero@unica.it Emanuela Marrocu Università di Cagliari e CRENoS E-mail: emarrocu@unica.it LA PERFORMANCE DI MODELLI NON ...
Page 1. 1 Gianna Boero CRENoS, University of Cagliari, and University of Warwick E-mail: boero@un... more Page 1. 1 Gianna Boero CRENoS, University of Cagliari, and University of Warwick E-mail: boero@unica.it Costanza Torricelli University of Modena E-mail: torricelli@unimo.it THE INFORMATION IN THE TERM STRUCTURE OF INTEREST RATES: ...
The aim of this paper is to compare the forecasting performance of SETAR and GARCH models against... more The aim of this paper is to compare the forecasting performance of SETAR and GARCH models against a linear benchmark using historical data for two bilateral dollar exchange rates, namely the Japanese Yen and the British Pound. The analysis is carried out with series sampled at weekly and daily frequencies. The relative performance of the models is evaluated on point forecasts and interval forecasts. Point forecasts evaluation tends to favour on average the linear models, though the analysis produces some evidence of forecasting gains from nonlinear models in sub-samples characterised by stronger non-linearity. Evaluation of interval forecasts clearly favours the GARCH models and shows that they are more accurate than the AR and SETAR models, especially at forecasting events in the tail regions of the distribution. JEL Codes: F31, F37
In recent years there has been a considerable development in modelling non-linearities and asymme... more In recent years there has been a considerable development in modelling non-linearities and asymmetries in economic and financial variables. The aim of this work is to compare the forecasting performance of different models for the returns of some of the most traded exchange rates in terms of the US dollar, namely the French franc (FF/$), the German mark (DM/$) and the Japanese yen (Y/$. We compare the relative performance of some nonlinear models and contrast them with their linear counterparts. Although we find evidence of some forecasting gains from nonlinear models, the results are sensitive to the forecast horizon and to the metric adopted to measure the forecasting accuracy. The use of data at different frequencies allows us to evaluate the possible effects of temporal aggregation. JEL Codes: F31, F37, C53 Keywords: Exchange Rates, Forecasting, Modeling
The aim of this paper is to evaluate the impact of monetary policy in tests of the Expectations H... more The aim of this paper is to evaluate the impact of monetary policy in tests of the Expectations Hypothesis of the term structure of interest rates. We apply the model developed by McCallum (1994b), in which the Expectations Hypothesis interacts with a policy reaction function and with a time-varying term premium, to eight countries with different monetary policy stances, within the period 1985 to 1995. The results suggest the importance of the treatment of monetary policy in explaining the empirical performance of the Expectations Hypothesis. Amongst other results, we also find that the model performs better for some countries than others depending upon the monetary policy stance adopted
The properties of Pearson's goodness-of-fit test, as used in density forecast evaluation, inc... more The properties of Pearson's goodness-of-fit test, as used in density forecast evaluation, income distribution analysis and elsewhere, are analysed. The components-of-chi-squared or "Pearson analog" tests of Anderson (1994) are shown to be less generally applicable than was originally claimed. For the case of equiprobable classes, where the general components tests remain valid, a Monte Carlo study shows that tests directed towards skewness and kurtosis may have low power, due to differences between the class boundaries and the intersection points of the distributions being compared. The power of individual component tests can be increased by the use of nonequiprobable classes.
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