ABSTRACT
In recent years, the simulation of scenarios of macroeconomic variables has became a crucial issue. Institutional operators, such as national banks, insurance companies, and investment banks must evaluate different scenarios of financial and macroeconomic variables before adopting a monetary policy or promoting a new pension plan. Economic variables such as interest rates and monetary aggregates are often studied by economists to forecast the path of the economy or to predict an ongoing recession. The relationship among interest rates at different maturities contains relevant information about future economic activities. A research of the Federal Reserve Bank (Estrella & Mishkin (1996)) emphasizes the role of the yield curve as a predictor of an ongoing recession. There is a strong relationship among the yield curve, monetary policy, and investor expectations. The monetary policy and the changes in investor expectations affect the slope of the term structure of interest rates; therefore it has been shown that the role of the yield curve is as an indicator of an ongoing recession, or to forecast the future inflation (Estrella & Trubin (2006)). The interest rates are also used for other purposes such as pricing derivatives, evaluating investment projects, or computing risk measures; thus, a good representation of the evolution of the yield curve in the long horizon is a key risk factor for decision makers.
