Working Paper: CEPR ID: DP15039
Authors: Alex Cukierman; Thomas Lustenberger
Abstract: We examine the cross-country relationships between measures of forecast uncertainty, forecast dispersion across individual forecasters and the variabilities of short-term interest rates and long-term yields. The main findings are: (i) Forecast uncertainty and forecast dispersion are positively and significantly related across countries for both short-term interest rates and long-term yields. (ii) A positive, albeit weaker, relation is found between forecast uncertainty and interest rate variability. (iii) Forecast dispersion of short-term interest rates and rates' variability are also positively associated. The evidence is followed by a Bayesian learning model that discusses conditions under which the results above are implied by theory.
Keywords: forecast dispersion; uncertainty; variability; private noisy information; public information
JEL Codes: E4; D8; G0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| forecast uncertainty (f_u) (G17) | forecast dispersion (f_d) (C46) |
| forecast uncertainty (f_u) (G17) | variability in interest rates (v_arrt) (E43) |
| forecast dispersion (f_d) (C46) | variability in interest rates (v_arrt) (E43) |