Working Paper: NBER ID: w2575
Authors: Frederic S. Mishkin
Abstract: This paper provides some refinements and updating of Fama's (1984) evidence on the information in the term structure about future spot interest rate movements. First, it uses econometric techniques that properly correct standard errors for overlapping data and for conditional heteroscedasticity. Second. it makes use of a new data set that has some potential advantages over Fama's and which has more recent data. Overall, the results are in broad agreement with those of Fama. The term structure does help predict spot interest rate movements several months into the future. Indeed. updating Fama's results indicates that the forecast power of forward rates is generally higher during the October 1982 to June 1986 period than it was during the sample periods Fama examined.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| term structure of interest rates (E43) | future movements of spot interest rates (E43) |
| forward rate-spot rate differential (F31) | changes in the spot rate (F31) |
| term structure of interest rates (E43) | changes in the spot rate (F31) |