Which model to forecast the target rate? / by Bruno Feunou, Jean-Sébastien Fontaine and Jianjian Jin.: FB3-5/2017-60E-PDF

"Specifications of the Federal Reserve target rate that have more realistic features mitigate in-sample over-fitting and are favored in the data. Imposing a positivity constraint and discrete increments significantly increases the accuracy of model out-of-sample forecasts for the level and volatility of the Federal Reserve target rates. In addition, imposing the constraints produces different estimates of the response coefficients. In particular, a new and simple specification, where the target rate is the maximum between zero and the prediction of an ordered-choice Probit model, is more accurate and has higher response coefficients to information about inflation and unemployment"--Abstract, p. ii.

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Publication information
Department/Agency Bank of Canada.
Title Which model to forecast the target rate? / by Bruno Feunou, Jean-Sébastien Fontaine and Jianjian Jin.
Series title Bank of Canada staff working paper, 1701-9397 ; 2017-60
Publication type Series - View Master Record
Language [English]
Format Electronic
Electronic document
Note(s) "December 2017."
Includes bibliographical references.
Text in English, abstract in English and French.
Publishing information Ottawa : Bank of Canada, 2017.
Author / Contributor Feunou, Bruno.
Jin, Jianjian.
Fontaine, Jean-Sébastien.
Description ii, 40 p. : graphs
Catalogue number
  • FB3-5/2017-60E-PDF
Subject terms Banks
Rates
Forecasting
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