A multicountry comparison of term-structure forecasts at long horizons

Abstract

This paper extends previous work on the information in the U.S. term structure at longer maturities to Britain, West Germany, and Switzerland. We find strong evidence that the term structure does have significant ability to forecast changes in inflation, particularly at long maturities. On the other hand, the ability of the term structure to forecast changes in one-year interest rates is somewhat weaker; only at the very longest horizon (five years) is there significant forecasting ability for interest-rate changes.