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The Predictive Power of the Term Structure during Recent Monetary Regimes
Author(s) -
HARDOUVELIS GIKAS A.
Publication year - 1988
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1988.tb03943.x
Subject(s) - predictability , predictive power , treasury , forward rate , term (time) , yield curve , interest rate , econometrics , economics , mathematics , statistics , monetary economics , geography , physics , archaeology , quantum mechanics , philosophy , epistemology
I use weekly Treasury‐bill rates with maturities of one to twenty‐six weeks to examine the information in forward rates during the 1970s and 1980s. Forward rates contain better information about future changes in spot rates than the information captured by autoregressivea nd vector‐autoregressivem odels. Forward rates also have considerable predictive power, which increased after October 1979 and remained strong after October 1982. The results show no necessary connection between interest rate predictability and the degree to which the Fed adheres to interest rate targeting.