FORECASTING CANADIAN SHORT-TERM INTEREST-RATES

I investigate the forecasting performance of a number of simple predic tion techniques for short-term interest rates. In particular, quarterl y forecasts of Canadian three-month T-bill rates, from one to forty qu arters in the future, are generated during 1963-92 using several time series methods and market-based yield curve strategies. Comparison is made with the martingale, and, for a shorter recent sample, with the p redictions made by several economic forecasters. For the most part, ut ilization of the yield curve proved best, though it must be granted th at no methodology was able to outperform the martingale for horizons u p to a year.