Estimating the Term Structure of Interest Rates for Monetary Policy Analysis
The authors compare estimation of spot and implied forward interest rates from Swedish Treasury bill and government bond yields with two functional forms, the simple Nelson and Siegel (NS) and the complex Longstaff and Schwartz (LS). Monetary policy rather than financial analysis is in focus, which affects the evaluation criteria. NS is easier to use and has better convergence properties. LS is more flexible. For the data used, estimates using NS and LS are close, with at most only marginally better fit for LS. The fit of NS seems satisfactory for monetary policy purposes. Copyright 1996 by The editors of the Scandinavian Journal of Economics.
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Volume (Year): 98 (1996)
Issue (Month): 2 (June)
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