Forecasting the Yield Curve for Poland

  • Tomasz Piotr Kostyra Szkoła Główna Handlowa w Warszawie
  • Michał Rubaszek Szkoła Główna Handlowa w Warszawie
Keywords: yield curve, forecasting, Diebold-Li model, machine learning

Abstract

ABSTRACT: This paper evaluates the accuracy of forecasts for Polish interest rates of various maturities. We apply the traditional autoregressive Diebold-Li framework as well as its extension, in which the dynamics of latent factors are explained with machine learning techniques. Our findings are fourfold. Firstly, they show that all methods have failed to predict the declining trend of interest rates. Secondly, they suggest that the dynamic affine models have not been able to systematically outperform standard univariate time series models. Thirdly, they indicate that the relative performance of the analyzed models has depended on yield maturity and forecast horizon. Finally, they demonstrate that, in comparison to the traditional time series models, machine learning techniques have not systematically improved the accuracy of forecasts.

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Published
2020-09-25
How to Cite
Kostyra, T., & Rubaszek, M. (2020). Forecasting the Yield Curve for Poland. Econometric Research in Finance, 5(2), 103 - 117. Retrieved from https://www.erfin.org/journal/index.php/erfin/article/view/92