Estimating and Interpreting Forward Interest Rates: Sweden 1992 - 1994

Svensson, Lars E. O.

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Estimating and Interpreting Forward Interest Rates: Sweden 1992 - 1994

NBER Working Paper No. w4871

49 Pages Posted: 25 May 2006 Last revised: 26 Oct 2022

See all articles by Lars E. O. Svensson

Lars E. O. Svensson

Stockholm School of Economics; Stockholm University - Institute for International Economic Studies (IIES); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

There are 2 versions of this paper

Date Written: September 1994

Abstract

The use of forward interest rates as a monetary policy indicator is demonstrated, using Sweden 1992-1994 as an example. The forward rates are interpreted as indicating market expectations of the time- path of future interest rates, future inflation rates, and future currency depreciation rates. They separate market expectations for the short, medium and long term more easily than the standard yield curve. Forward rates are estimated with an extended and more flexible version of Nelson and Siegel's functional form.

Suggested Citation: Suggested Citation

Svensson, Lars E.O., Estimating and Interpreting Forward Interest Rates: Sweden 1992 - 1994 (September 1994). NBER Working Paper No. w4871, Available at SSRN: https://ssrn.com/abstract=226502