International Evidence on Professional Interest Rate Forecasts: The Impact of Forecasting Ability

Alex Cukierman and Thomas Lustenberger

No 2018-10, Working Papers from Swiss National Bank

Abstract: This paper develops a model of honest rational professional forecasters with different abilities and submits it to empirical verification using data on 3- and 12-months ahead forecasts of short-term interest rates and of long-term bond yields for up to 33 countries collected by Consensus Economics. The main finding is that in many countries, less-precise forecasters weigh public information more heavily than more-precise forecasters who weigh their own private information relatively more heavily. One implication of this result is that less-precise forecasters herd after more-precise forecasters even in the absence of strategic considerations. We also document differences between the average forecasting errors of more- and less-able forecasters as well as substantial correlations between the forecast errors of different forecasters.

Keywords: Forecasting interest rates and bond yields; impact of forecasting ability on forecast formation (search for similar items in EconPapers)
JEL-codes: E47 G17 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2018
New Economics Papers: this item is included in nep-for and nep-mac
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Working Paper: International evidence on professional interest rates forecasts: The impact of forecasting ability (2017)
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