Advanced Search
MyIDEAS: Login to save this paper or follow this series

Forecasting Changes in UK Interest Rates

Contents:

Author Info

  • Thanaset Chevapatrakul

    ()
    (Department of Economics, Loughborough University)

  • Tae-Hwan Kim

    ()
    (Deparment of Economics, University of Nottingham)

  • Paul Mizen

    ()
    (Department of Economics, University of Nottingham)

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 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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/ThanasetJOF.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Huw Edwards)
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_26.

as in new window
Length:
Date of creation: Nov 2007
Date of revision: Nov 2007
Handle: RePEc:lbo:lbowps:2007_26

Contact details of provider:
Postal: Loughborough, Leicestershire, LE11 3TU
Phone: +44 (0) 1509 222701
Fax: +44 (0) 1509 223910
Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html
More information through EDIRC

Related research

Keywords: Interest rates; monetary policy; Bank of England;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Eichengreen, Barry & Watson, Mark W & Grossman, Richard S, 1985. "Bank Rate Policy under the Interwar Gold Standard: A Dynamic Probit Model," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 95(379), pages 725-45, September.
  2. Ben S. Bernanke & Jean Boivin, 2001. "Monetary Policy in a Data-Rich Environment," NBER Working Papers 8379, National Bureau of Economic Research, Inc.
  3. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 39(1), pages 195-214, December.
  4. Ben S. Bernanke & Michael Woodford, 1997. "Inflation Forecasts and Monetary Policy," NBER Working Papers 6157, National Bureau of Economic Research, Inc.
  5. Goodfriend, Marvin, 1991. "Interest rates and the conduct of monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 34(1), pages 7-30, January.
  6. Batini, Nicoletta & Nelson, Edward, 2001. "Optimal horizons for inflation targeting," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(6-7), pages 891-910, June.
  7. Nicoletta Batini & Andrew G Haldane, 1999. "Forward-looking rules for monetary policy," Bank of England working papers 91, Bank of England.
  8. Svensson, Lars E O, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1511, C.E.P.R. Discussion Papers.
  9. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," Working Papers, C.V. Starr Center for Applied Economics, New York University 97-32, C.V. Starr Center for Applied Economics, New York University.
  10. Michael J. Dueker, 2000. "Are prime rate changes asymmetric?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 33-40.
  11. Dueker, Michael, 1999. "Conditional Heteroscedasticity in Qualitative Response Models of Time Series: A Gibbs-Sampling Approach to the Bank Prime Rate," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 17(4), pages 466-72, October.
  12. James Mitchell & Richard J. Smith & Martin R. Weale & Stephen Wright & Eduardo L. Salazar, 2005. "An Indicator of Monthly GDP and an Early Estimate of Quarterly GDP Growth," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(501), pages F108-F129, 02.
  13. Rudebusch, Glenn D., 2002. "Term structure evidence on interest rate smoothing and monetary policy inertia," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(6), pages 1161-1187, September.
  14. Budd, Alan, 1998. "The Role and Operations of the Bank of England Monetary Policy Committee," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(451), pages 1783-94, November.
  15. Gerlach, Stefan & Smets, Frank, 1999. "Output gaps and monetary policy in the EMU area1," European Economic Review, Elsevier, Elsevier, vol. 43(4-6), pages 801-812, April.
  16. Lars E.O. Svensson, 2002. "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Working Papers, Princeton University, Department of Economics, Center for Economic Policy Studies. 118, Princeton University, Department of Economics, Center for Economic Policy Studies..
  17. Schnader, M H & Stekler, H O, 1990. "Evaluating Predictions of Change," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 63(1), pages 99-107, January.
  18. Gerlach-Kristen, Petra, 2003. "Interest rate reaction functions and the Taylor rule in the euro area," Working Paper Series, European Central Bank 0258, European Central Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bergmeir, Christoph & Costantini, Mauro & Benítez, José M., 2014. "On the usefulness of cross-validation for directional forecast evaluation," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 76(C), pages 132-143.
  2. Jan-Egbert Sturm & Jakob de Haan, 2009. "Does Central Bank Communication really Lead to better Forecasts of Policy Decisions? New Evidence Based on a Taylor Rule Model for the ECB," CESifo Working Paper Series 2760, CESifo Group Munich.
  3. Paul Mizen & Serafeim Tsoukas, 2011. "Forecasting US bond default ratings allowing for previous and initial state dependence in an ordered probit model," Working Papers, Business School - Economics, University of Glasgow 2011_19, Business School - Economics, University of Glasgow.
  4. Chevapatrakul, Thanaset & Kim, Tae-Hwan & Mizen, Paul, 2012. "Monetary information and monetary policy decisions: Evidence from the euroarea and the UK," Journal of Macroeconomics, Elsevier, Elsevier, vol. 34(2), pages 326-341.
  5. Mizen, Paul & Tsoukas, Serafeim, 2011. "Forecasting US bond default ratings allowing for previous and initial state dependence in an ordered probit model," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2011-69, Scottish Institute for Research in Economics (SIRE).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lbo:lbowps:2007_26. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Huw Edwards).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.