Items related to Futures Contract Rates as Monetary Policy Forecasts

Futures Contract Rates as Monetary Policy Forecasts - Softcover

Ferrero, Giuseppe; Nobili, Andrea

 
9781249557593: Futures Contract Rates as Monetary Policy Forecasts
Softcover
ISBN 10: 1249557593 ISBN 13: 9781249557593
Publisher: Bibliogov, 2012

Synopsis

The prices of futures contracts on short-term interest rates are commonly used by central banks to gauge market expectations concerning monetary policy decisions. Excess returns - the difference between futures rates and the realized rates - are positive, on average, and statistically significant, both in the euro area and in the United States. We find that these biases are significantly related to the business cycle only in the United States. Moreover, the sign and the significance of the estimated relationships with business-cycle indicators are unstable over time. Breaking the excess returns down into risk-premium and forecast-error components, we find that risk premia are countercyclical in both areas. On the contrary, ex post prediction errors, which represent the greater part of excess returns at longer horizons in both areas, are negatively correlated with the business cycle only in the United States.

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Publisher
Bibliogov
Publication date
2012
Language
English
ISBN 10 
1249557593
ISBN 13 
9781249557593
Binding
Paperback
Number of pages
40