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Forecasting changes in UK interest rates

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posted on 12.02.2009, 13:12 by Thanaset ChevapatrakulThanaset Chevapatrakul, Tae-Hwan Kim, Paul Mizen
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 comittee 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 analyze the predictive ability of two information sets, we find that the approach has predictive ability both in-sample and out-of-sample that helps forecast the direction of future rates.

History

School

  • Business and Economics

Department

  • Economics

Publisher

© Loughborough University

Version

VoR (Version of Record)

Publication date

2007

Notes

This is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_26.html

ISSN

1750-4171

Book series

Loughborough University. Department of Economics. Discussion Paper Series;WP 2007 - 26

Language

en

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Keywords

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