Overnight Index Swap Market-Based Measures of Monetary Policy Expectations
35 Pages Posted: 2 Mar 2018
Date Written: February 9, 2018
I assess the use of overnight indexed swap (OIS) rates as measures of monetary policy expectations. I find that one to twelve-month US OIS rates provide measures of investors’ interest rate expectations that are comparable to those from corresponding-horizon federal funds futures rates, which have regularly been used as financial market-based measures of US interest rate expectations. More generally, I find that one to 24-month US, euro-zone and Japanese OIS rates and one to 18-month UK OIS rates tend to accurately measure expectations of future short-term interest rates. Motivated by these results, researchers can look to OIS rates as globally comparable measures of monetary policy expectations.
Keywords: Federal funds futures, overnight indexed swaps, monetary policy expectations
JEL Classification: E43, E44, E52
Suggested Citation: Suggested Citation