Extracting expectations of New Zealand's Official Cash Rate from the bank-risk yield curve
The 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.
|Date of creation:||Mar 2002|
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- John Y. Campbell, 1995.
"Some Lessons from the Yield Curve,"
Harvard Institute of Economic Research Working Papers
1713, Harvard - Institute of Economic Research.
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"A simple estimator of cointegrating vectors in higher order integrated systems,"
Working Paper Series, Macroeconomic Issues
91-3, Federal Reserve Bank of Chicago.
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