Extracting expectations of New Zealand's Official Cash Rate from the bank-risk yield curve
AbstractThe hypothesis that a forward term-premium (FTP) exists between forward 1- day rates calculated from the New Zealand bank-risk yield curve and the corresponding ex-post Official Cash Rate (OCR) is tested by applying a single equation method for a cointegrated system to daily data from March 1999 to December 2001. The results indicate that the FTP is statistically significant for all forward horizons tested. The results also indicate that the estimates of the FTP appear to be an increasing function of the forward horizon, and the FTP may be tentatively represented as a simple monotonically-increasing analytical function. The model may be used in reverse to imply current ex-ante expectations of the OCR.
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Bibliographic InfoPaper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2002/01.
Date of creation: Mar 2002
Date of revision:
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-06-13 (All new papers)
- NEP-CBA-2002-06-13 (Central Banking)
- NEP-FMK-2002-06-13 (Financial Markets)
- NEP-MON-2002-06-13 (Monetary Economics)
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