The Federal Reserve Board eagle logo links to home page
Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page Moving Endpoints and the Internal Consistency of Agents' Ex Ante Forecasts
Sharon Kozicki and P.A. Tinsley

Abstract: Forecasts by rational agents contain embedded initial and terminal boundary conditions. Standard time series models generate two types of long-run "endpoints"---fixed endpoints and moving average endpoints. Neither can explain the shifting endpoints implied by postwar movements in the cross-section of forward rate forecasts in the term structure or by post-1979 changes in survey estimates of expected inflation. Multiperiod forecasts by a broader class of "moving endpoint" time series models provide substantially improved tracking of the historical term structure and generally support the internal consistency of the ex ante long-run expectations of bond traders and survey respondents.

Keywords: Boundary values, expected inflation, term structure

Full paper (208 KB PDF) | Full paper (517 KB Postscript)

Home | Economic research and data | FR working papers | FEDS | 1996 FEDS papers
To comment on this site, please fill out our feedback form.
Last update: July 16, 1997