Does real-time macroeconomic information help to predict interest rates?

TY - JOUR

T1 - Does real-time macroeconomic information help to predict interest rates?

AU - Caruso, Alberto

AU - Coroneo, Laura

N1 - © 2023 The Ohio State University. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details

PY - 2023/2/7

Y1 - 2023/2/7

N2 - We analyse the predictive ability of real-time macroeconomic information for the yield curve of interest rates. We specify a mixed-frequency macro-yields model in real-time that incorporates interest rate surveys and treats macroeconomic factors as unobservable components. Results indicate that real-time macroeconomic information is helpful to predict interest rates, and that data revisions drive a superior predictive ability of revised macro data over real-time macro data. We also find that interest rate surveys can have significant predictive power over and above real-time macro variables.

AB - We analyse the predictive ability of real-time macroeconomic information for the yield curve of interest rates. We specify a mixed-frequency macro-yields model in real-time that incorporates interest rate surveys and treats macroeconomic factors as unobservable components. Results indicate that real-time macroeconomic information is helpful to predict interest rates, and that data revisions drive a superior predictive ability of revised macro data over real-time macro data. We also find that interest rate surveys can have significant predictive power over and above real-time macro variables.

KW - Government Bonds

KW - Factor Models

KW - Real-Time Macroeconomics

KW - survey data

KW - Forecasting

U2 - 10.1111/jmcb.13021

DO - 10.1111/jmcb.13021

M3 - Article

SN - 0022-2879

JO - Journal of Money Credit and Banking

JF - Journal of Money Credit and Banking

ER -