Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153412
Authors: 
Joyce, Michael
Relleen, Jonathan
Sorensen, Steffen
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper 978
Abstract: 
This paper reviews the main instruments and associated yield curves that can be used to measure financial market participants’ expectations of future UK monetary policy rates. We attempt to evaluate these instruments and curves in terms of their ability to forecast policy rates over the period from October 1992, when the United Kingdom first adopted an explicit inflation target, to March 2007. We also investigate several model-based methods of estimating forward term premia, in order to calculate riskadjusted forward interest rates. On the basis of both in and out-of-sample test results, we conclude that, given the uncertainties involved, it is unwise to rely on any one technique to measure policy rate expectations and that the best approach is to take an inclusive approach, using a variety of methods and information.
Subjects: 
forecasting
Interest Rates
term premia
JEL: 
E43
E44
E52
Document Type: 
Working Paper

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