Improving Federal-Funds Rate Forecasts in VAR Models Used for Policy Analysis
Bibliographic Data
| ID | 19420028 |
|---|---|
| Authors | John C Robertson (Federal Reserve Bank of Atlanta), Ellis W Tallman (0000-0001-8387-2768, Federal Reserve Bank of Atlanta) |
| Year | 2001 |
| Volume | 19 |
| Issue | 3 |
| Pages | 324-330 |
| Publication date | 2001-07-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Business and Economic Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0735-0015 • E-ISSN: 1537-2707 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1198/073500101681019972 |
| OpenAlex | W2092922676 |
| Language | EN |
| Citations received | 4 |
| References cited | 16 |
Federal-funds rate-forecast errors from vector autoregressive (VAR) models used for monetary policy analysis and fitted by ordinary least squares (OLS) are large relative to those from the futures market. Using three different structural VAR models, we show that forecasts based on a shrinkage estimator dominate the OLS-based forecasts—even after restricting the lag length and/or imposing exact unit-root restrictions—and are broadly comparable to the futures-market forecasts. Our results refute the perception that VAR models forecast the funds rate poorly in general and suggest that using stochastic prior restrictions can provide an effective way of improving forecast accuracy without sacrificing structural interpretation
Autoregressive model · Cointegration · Econometrics · Economics · Estimator · Federal funds · Financial economics · Futures contract · Macroeconomics · Monetary policy · Ordinary least squares · Statistics · Unit root · Vector autoregression · Forecasting Techniques and Applications · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact
Asymptotic Inference about Predictive Ability
Forecasting and conditional projection using realistic prior distributions
Testing the equality of prediction mean squared errors
Tests for Forecast Encompassing
Forecasting with Bayesian Vector Autoregressions
Forecasting With Bayesian Vector Autoregressions—Five Years of Experience
Conditional Forecasts in Dynamic Multivariate Models
The Dynamic Impacts of Monetary Policy
Macroeconomic Forecasting
| Citations per year | 0.15 |
|---|---|
| Citation span | 2000 - 2009 (10) |
| Highly cited | No |