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Estimation and Forecasting of Russian Money Market Yield Curves

Author

Listed:
  • Dmitry Fedorov

    (Lomonosov Moscow State University)

  • Timur Magzhanov

    (Lomonosov Moscow State University)

  • Philipp Kartaev

    (Lomonosov Moscow State University)

Abstract

The paper analyses an approach to forecasting the trajectory of the RUONIA money market rate (key rate proxy), based on a linear combination of the values of the ROISfix swap yield curves, which reflect market expectations about the future trajectory of the rate, and the forecasts of a vector autoregression model incorporating macroeconomic variables. The Nelson-Siegel and Svensson models are used to construct yield curves. According to the results obtained, for horizons of a year or more, the application of the proposed combination improves the accuracy of forecasts compared to market forecasts, while for shorter horizons, market expectations are more accurate. The study also analyses the impact of a monetary policy shock on yield curve parameters using the local projections method and shows that a monetary policy shock changes the shape of market forecasts, affecting the yield curve at all time horizons and raising long-term rate expectations by one percentage point. To test the applicability of the model in practice, a simulation of the monetary shock of 28 February 2022 was conducted.

Suggested Citation

  • Dmitry Fedorov & Timur Magzhanov & Philipp Kartaev, 2025. "Estimation and Forecasting of Russian Money Market Yield Curves," Russian Journal of Money and Finance, Bank of Russia, vol. 84(2), pages 36-64, June.
    • Handle: RePEc:bkr:journl:v:84:y:2025:i:2:p:36-64
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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