Forecasting changes in UK interest rates

Tae Hwan Kim, Paul Mizen, Thanaset Chevapatrakul

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

Making accurate forecasts of the future direction of interest rates is a vital element when making economic decisions. The focus on central banks as they make decisions about the future direction of interest rates requires the forecaster to assess the likely outcome of committee decisions based on new information since the previous meeting. We characterize this process as a dynamic ordered probit process that uses information to decide between three possible outcomes for interest rates: an increase, decrease or no change. When we analyse the predictive ability of two information sets, we find that the approach has predictive ability both in-sample and out-of-sample that helps forecast the direction of future rates.

Original languageEnglish
Pages (from-to)53-74
Number of pages22
JournalJournal of Forecasting
Volume27
Issue number1
DOIs
Publication statusPublished - 2008 Jan

All Science Journal Classification (ASJC) codes

  • Modelling and Simulation
  • Computer Science Applications
  • Strategy and Management
  • Statistics, Probability and Uncertainty
  • Management Science and Operations Research

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