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Forecasting the Yield Curve With Macroeconomic Variables

Author

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  • Michał Rubaszek

    (Warsaw School of Economics, Econometrics Institute)

Abstract

This paper compares the accuracy of interest rates forecasts from dynamic, affine yield curve models, also those that take into account the correlation of latent factors and macroeconomic variables. The empirical results suggest that the affine models are better in explaining future movements in interest rates than the benchmark, arbitrage-free model. Moreover, we show that interest rates forecasts conditional on the realization of inflation and the unemployment rate are more accurate than unconditional forecasts.

Suggested Citation

  • Michał Rubaszek, 2016. "Forecasting the Yield Curve With Macroeconomic Variables," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 1(1), pages 1-21, June.
    • Handle: RePEc:sgh:erfinj:v:1:y:2016:i:1:p:1-21
    DOI: 10.33119/ERFIN.2016.1.1.1
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    Citations

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    Cited by:

    1. Tomasz Piotr Kostyra & Michał Rubaszek, 2020. "Forecasting the Yield Curve for Poland," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 5(2), pages 103-117, December.
    2. Tomasz P. Kostyra, 2022. "Yield Curve Modelling with the Nelson-Siegel Method for Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 44-56.
    3. Dewundara Liyanage P. M. Rathnasingha & Kangara Pathirannehelage N. S. Dayarathne, 2021. "Constructing the Yield Curve for Sri Lankas Government Bond Market," International Journal of Business and Economic Affairs (IJBEA), Sana N. Maswadeh, vol. 6(1), pages 56-69.
    4. Jakub Rybacki, 2019. "Does Forward Guidance Matter in Small Open Economies? Examples from Europe," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 4(1), pages 1-26, June.

    More about this item

    Keywords

    yield curve; forecasting; Diebold-Li model;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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