Template-Type: ReDIF-Paper 1.0
Author-Name: Andrea Monticini
Author-X-Name-First: Andrea 
Author-X-Name-Last: Monticini
Author-Email: andrea.monticini@gmail.com
Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore
Author-Name: Francesco Ravazzolo
Author-X-Name-First: Francesco 
Author-X-Name-Last: Ravazzolo
Author-Email: francesco.ravazzolo@norges-bank.no
Author-Workplace-Name: Norges Bank and BI Norwegian Business School
Title: Forecasting the intraday market price of money
Abstract: Central banks' operations and eciency arguments would suggest that the intraday interest
rate should be set to zero. However, a liquidity crisis introduces frictions related to news, which
can cause an upward jump of the intraday rate. This paper documents that these dynamics
can be partially predicted during turbulent times. Long memory approaches or a combination
of them to account for model uncertainty outperform random walk, autoregressive and moving
average benchmarks in terms of point and density forecasting. The relative accuracy is higher
when the full distribution is predicted. We also document that such statistical accuracy can
provide economic gains in investment strategies based on lending in the intraday market.
Length: 29
Creation-Date: 2014-02
File-URL: http://dipartimenti.unicatt.it/economia-finanza-def010.pdf
File-Format: Application/pdf
File-Function: First version, 2014
Number: def010
Classification-JEL: C22, C53, E4, E5.
Keywords: interbank market, intraday interest rate, forecasting, density forecasting, policy tools. 
Handle: RePEc:ctc:serie1:def010