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Forecasting Interest Rates over the Long Run

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Abstract

In a previous post, we showed how market rates on U.S. Treasuries violate the expectations hypothesis because of time-varying risk premia. In this post, we provide evidence that term structure models have outperformed direct market-based measures in forecasting interest rates. This suggests that term structure models can play a role in long-run planning for public policy objectives such as assessing the viability of Social Security.

Suggested Citation

  • Tobias Adrian & Richard K. Crump & Peter A. Diamond & Rui Yu, 2016. "Forecasting Interest Rates over the Long Run," Liberty Street Economics 20160718, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87139
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    More about this item

    Keywords

    social security; discounting; term structure of interest rates; term premiums;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • G1 - Financial Economics - - General Financial Markets
    • H0 - Public Economics - - General

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