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Estimating and Interpreting Forward Interest Rates: Sweden 1992-1994
Author:
Mr. Lars E. O. Svensson null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1994: Issue 114
Language:
English
Publication Date:
01 Sep 1994
DOI:
https://doi.org/10.5089/9781451853759.001
ISBN:
9781451853759
ISSN:
1018-5941
Pages:
76
Keywords:
WP; risk premium; monetary policy; spot rate; maturity date; inflation expectation; short interest; inflation rate; marginal lending rate; Inflation; Futures; Bonds; Yield curve; Return on investment; Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The use of forward interest rates as a monetary policy indicator is demonstrated, using Sweden 1992-1994 as an example. The forward rates are interpreted as indicating market expectations of the time-path of future interest rates, future inflation rates, and future currency depreciation rates. They separate market expectations for the short-, medium-, and long-term more easily than the standard yield curve. Forward rates are estimated with an extended and more flexible version of Nelson and Siegel’s functional form.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund