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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Futures Contract Rates as Monetary Policy Forecasts

Futures Contract Rates as Monetary Policy Forecasts

Ferrero, Giuseppe
Nobili, Andrea
International Journal of Central Banking

Paperback

General Political Science

ISBN10: 1249557593
ISBN13: 9781249557593
Publisher: Bibliogov
Published: Sep 26 2012
Pages: 40
Weight: 0.20
Height: 0.08 Width: 7.44 Depth: 9.69
Language: English
The prices of futures contracts on short-term interest rates are commonly used by central banks to gauge market expectations concerning monetary policy decisions. Excess returns - the difference between futures rates and the realized rates - are positive, on average, and statistically significant, both in the euro area and in the United States. We find that these biases are significantly related to the business cycle only in the United States. Moreover, the sign and the significance of the estimated relationships with business-cycle indicators are unstable over time. Breaking the excess returns down into risk-premium and forecast-error components, we find that risk premia are countercyclical in both areas. On the contrary, ex post prediction errors, which represent the greater part of excess returns at longer horizons in both areas, are negatively correlated with the business cycle only in the United States.

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