Forecasting Models of Rediscount Rate in Taiwan

• Main Authors: Hui Chun Hung, 洪慧純
• Other Authors: S. Y. Wen
• Format: Others
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/96580764751519515534

碩士 === 長庚大學 === 管理學院碩士學位學程在職專班經營管理組 === 98 === Changes in interest rate of a country have vital impact on its total economic development, so Central Bank of a country would adopt tightened or relax interest rate policy to achieve the gold of stabilize economy. The examination and forecasting of interest rate fluctuation factors are still the focus of concern presently and they were targeted to study. Among many theories in interest rate forecasting, Professor John Taylor of Stanford University presented his Taylor Rule, which offered a model for forecasting the interest rate change of US Federal Reserve. Taylor Rule is simple; it is proved to have very good forecasting capability. In view of this, this research conducted forecast of re-discount rate of Taiwan on the basis of primitive Taylor Rule. Also, considering USA is the locomotive of global economy, which has traction effects on economic development of other countries, so the forecasting model of this research, in addition to the primitive Taylor Rule, the US Federal Reserve interest rates and exchange rates are included for the model modification and analysis of primitive Taylor Rule. In this research, 120 pieces of monthly data ranged between Jan. 2000 and Dec. 2009 was applied and Taylor Rule was used and Least Square (LS) and Error Correction Model (ECM) were employed to construct the forecasting model of Rediscount Rate Forecasting Model of Taiwan. The empirical result disclosed that US Federal Reserve Interest and Exchange Rate Model can raise the interest forecasting capability. When MAE, RSME and MAPE indices are used to forecast error, the ECM interest rate forecasting ability is better then LS.