DP15039 Uncertainty and dispersion in professional interest rate forecasts: International evidence and theory
|Author(s):||Alex Cukierman, Thomas Lustenberger|
|Publication Date:||July 2020|
|Keyword(s):||forecast dispersion, private noisy information, public information, uncertainty, Variability|
|JEL(s):||D8, E4, G0|
|Programme Areas:||Financial Economics, Monetary Economics and Fluctuations|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=15039|
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.