Domínguez, Emilio and Novales Cinca, Alfonso (2002) Dynamic correlations and forecasting of term structure slopes in eurocurrency market. [Working Paper or Technical Report]
Official URL: http://eprints.ucm.es/7688/
Using monthly data on Euro-rates for 1979-1998, we examine the extent to which crosscountry information on term structure slopes can be used to improve upon univariate slope forecasts. This is interesting from the point of view of forecasting economic activity, since term structure slopes are known to anticipate fluctuations in the real economy. Additionally, the Expectations Hypothesis states that the term structure slope summarizes the available information which is relevant for forecasting future short-term interest rates, so that improved slope forecasts might also lead to better forecasts of future interest rates. We find ample evidence of significant explanatory power in term structure slopes across countries. Besides, we document that this information content leads to improved forecasts of the term structure slope in some countries, using a foreign slope as indicator.
|Item Type:||Working Paper or Technical Report|
|Additional Information:||JEL Classification: E37, E43|
|Uncontrolled Keywords:||Term structure of interest rates, Term structure slope, Expectations hypothesis, Eurocurrencies|
|Subjects:||Social sciences > Economics > Macroeconomics|
|Series Name:||Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)|
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|Deposited On:||04 Mar 2008|
|Last Modified:||26 Jun 2012 13:10|
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