Predictability of Market Interest Rates. Panel Data Approach

The work presented describes the problem of transparency of the Federal Reserve System decisions and its influence on the marker rate predictability. In 2002 in the USA the Federal Reserve System began to publish the main results of the FOMC meetings immediately after the session in their transcripts. That is why the period considered in this paper is from 1987 to 2002. Thus, the hypothesis that if such information had been released before the 2002, then the predictability of market interest rates (in this research - prime loan rates) would have been improved is proved. The whole analysis is divided into two parts – using aggregated and disaggregated data. Three main types of individual policy preferences revealed during policy deliverations at the FOMC meetings are analyzed as the main dissents, which may make the forecasted values of interest rates more accurate.