New model accurately predicts long term interest rates, solving economic puzzle.
The article explores how long-term interest rates can be predicted using a combination of economic variables and past interest rate data. By analyzing predictions from a set of equations and past interest rate values, researchers found that both sources of information play a role in shaping expectations for future interest rates. The model developed in the study accurately captures long-term interest rate trends, even during periods of economic uncertainty. Overall, the findings suggest that understanding how expectations for future interest rates are formed can help explain movements in long-term interest rates.