Does Real-Time Macroeconomic Information Help to Predict Interest Rates?

Abstract

We analyse the predictive ability of real-time macroeconomic information for the yield curve of interest rates. We specify a mixed-frequency macro-yields model in real-time that incorporates interest rate surveys and treats macroeconomic factors as unobservable components. Results indicate that real-time macroeconomic information is helpful to predict interest rates, and that data revisions drive a superior predictive ability of revised macro data over real-time macro data. We also find that interest rate surveys can have significant predictive power over and above real-time macro variables.

Keywords: Government Bonds; Dynamic Factor Models; Real-Time Macroeconomics; Survey Data.

JEL Classification: C32, C38, C53, E43, E44, G12.