Uncertainty and Dispersion in Professional Interest Rate Forecasts: International Evidence and Theory

26 Pages Posted: 28 Jul 2020 Last revised: 16 Aug 2020

See all articles by Alex Cukierman

Alex Cukierman

Tel Aviv University - Eitan Berglas School of Economics; Interdisciplinary Center (IDC) Herzliyah; Centre for Economic Policy Research (CEPR)

Thomas Lustenberger

Swiss National Bank; University of Basel - Faculty of Business and Economics

Date Written: July 2020

Abstract

We examine the cross-country relationships between measures of forecast uncertainty, forecast dispersion across individual forecasters and the variabilities of short-term interest rates and long-term yields. The main findings are: (i) Forecast uncertainty and forecast dispersion are positively and significantly related across countries for both short-term interest rates and long-term yields. (ii) A positive, albeit weaker, relation is found between forecast uncertainty and interest rate variability. (iii) Forecast dispersion of short-term interest rates and rates' variability are also positively associated. The evidence is followed by a Bayesian learning model that discusses conditions under which the results above are implied by theory.

Keywords: forecast dispersion, private noisy information, public information, uncertainty, Variability

JEL Classification: D8, E4, G0

Suggested Citation

Cukierman, Alex and Lustenberger, Thomas and Lustenberger, Thomas, Uncertainty and Dispersion in Professional Interest Rate Forecasts: International Evidence and Theory (July 2020). CEPR Discussion Paper No. DP15039, Available at SSRN: https://ssrn.com/abstract=3661382

Alex Cukierman (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 540 5360 (Phone)
+972 3 640 9908 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

HOME PAGE: http://www.tau.ac.il/~alexcuk/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Thomas Lustenberger

University of Basel - Faculty of Business and Economics ( email )

Petersplatz 1
Basel, 4001
Switzerland

Swiss National Bank

Research
Fraumuensterstr. 8
Zuerich, 8022
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
115
PlumX Metrics