Title: Yield curve forecasting in the euro area
Authors: Marco Taboga - Banca d'Italia (Italy) [presenting]
Francesco Corsello - Bank of Italy (Italy)
Abstract: The purpose is to assess the ability of competing models and estimation methodologies to provide accurate point and density forecasts of government yield curves. We focus on euro area countries, which have seldom been analyzed by the literature despite the importance of yield curve forecasts in the Eurosystem policy framework. We find that among several models, including some that have been successful in forecasting the US yield curve, no one is able to consistently produce point forecasts that are superior to random walk forecasts. We instead find that density forecasts produced by Bayesian stochastic volatility models with a random walk component are correctly calibrated and provide the best performance in terms of continuous ranked probability scores.