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Forecasting commercial paper rates

Author

Listed:
  • William Carlson

    (Duquesne University, USA)

  • Celia Varick

    (Lamar University, USA)

  • Conway Lackman

    (Duquesne University, USA)

Abstract

A model previously developed by Lackman (C. L. Lackman, Forecasting commercial paper rates. Journal of Business Finance and Accounting 15 (1988) 499-524) for the period 1960 to 1985 is updated to include the 1990s and incorporate statistical techniques relating to tests for stationary conditions not available in 1988. As in the previous model, the demand for commercial paper by each institution (Households (HH), Life Insurance Companies (LIC), Non-Financial Corporations (CRP) and Finance Corporations (FC)) and the total demand is simulated. Simulations of the commercial paper rate are also generated-using just the demand equations (total supply exogenous) and then employing the entire model (supply endogenous) to determine the rate. Simulation periods are from 1960:2 to 2001:4 for all demand simulations. The dynamic simulation of the total demand for commercial paper performs well. The resulting root mean square error, 3.485, compares favourably with the Federal Reserve Boston-Massachusetts Institute of Technology (FRB-MIT) estimate of the commercial paper rate (deLeeuw and Granlich, 1968). Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • William Carlson & Celia Varick & Conway Lackman, 2004. "Forecasting commercial paper rates," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(1), pages 67-76.
    • Handle: RePEc:jof:jforec:v:23:y:2004:i:1:p:67-76
    DOI: 10.1002/for.902
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    References listed on IDEAS

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    1. William C. Freund & Edward D. Zinbarg, 1963. "Application Of Flow Of Funds To Interest‐Rate Forecasting," Journal of Finance, American Finance Association, vol. 18(2), pages 231-248, May.
    2. Friedman, Benjamin M, 1977. "Financial Flow Variables and the Short-Run Determination of Long-Term Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 661-689, August.
    3. Friedman, Benjamin Morton, 1977. "Financial Flow Variables and the Short-Run Determination of Long-Term Interest Rates," Scholarly Articles 4554309, Harvard University Department of Economics.
    4. Frank De Leeuw & Edward M. Gramlich, 1968. "The Federal Reserve-MIT economic model," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 11-40.
    5. Durbin, J, 1970. "Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors are Lagged Dependent Variables," Econometrica, Econometric Society, vol. 38(3), pages 410-421, May.
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