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This paper reviews the main instruments and associated yield curves that can be used to measure financial market participants' expectations of future UK monetary policy rates. The authors attempt to evaluate these instruments and curves in terms of their ability to forecast policy rates over the period from October 1992, when the United Kingdom first adopted an explicit inflation target, to March 2007. They also investigate several model-based methods of estimating forward term premia, in order to calculate risk-adjusted forward interest rates.
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