Arbeitspapier
Modelling and Forecasting the Yield Curve under Model uncertainty
This paper proposes a procedure to investigate the nature and persistence of the forces governing the yield curve and to use the extracted information for forecasting purposes. The latent factors of a model of the Nelson-Siegel type are directly linked to the maturity of the yields through the explicit description of the cross-sectional dynamics of the interest rates. The intertemporal dynamics of the factors is then modeled as driven by long-run forces giving rise to enduring effects, and by medium- and short-run forces producing transitory effects. These forces are re-constructed in real time with a dynamic filter whose embedded feedback control recursively corrects for model uncertainty, including additive and parameter uncertainty and possible equation misspecifications and approximations. This correction sensibly enhances the robustness of the estimates and the accuracy of the out-of-sample forecasts, both at short and long forecast horizons.
- Language
-
Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 917
- Classification
-
Wirtschaft
- Subject
-
Frequency decomposition
Model uncertainty
monetary policy
yield curve
Zinsstruktur
Rendite
Geldpolitik
Risiko
Modellierung
Theorie
- Event
-
Geistige Schöpfung
- (who)
-
Donati, Paola
Donati, Francesco
- Event
-
Veröffentlichung
- (who)
-
European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2008
- Handle
- Last update
- 10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Donati, Paola
- Donati, Francesco
- European Central Bank (ECB)
Time of origin
- 2008
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