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Moving Endpoints and the Internal Consistency of Agents' Ex Ante Forecasts

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  • Kozicki, Sharon
  • Tinsley, P A

Abstract

Forecasts by rational agents contain embedded initial and terminal boundary conditions. Standard time series models generate two types of long-run boundary values or steady-state "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-l979 changes in survey estimates of expected long-run 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. Citation Copyright 1998 by Kluwer Academic Publishers.

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Bibliographic Info

Article provided by Society for Computational Economics in its journal Computational Economics.

Volume (Year): 11 (1998)
Issue (Month): 1-2 (April)
Pages: 21-40

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Handle: RePEc:kap:compec:v:11:y:1998:i:1-2:p:21-40

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  1. repec:nbr:nberwo:2341 is not listed on IDEAS
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Cited by:
  1. Sharon Kozicki & P.A. Tinsley, 2001. "Dynamic specifications in optimizing trend-deviation macro models," Research Working Paper RWP 01-03, Federal Reserve Bank of Kansas City.
  2. Todd E. Clark & Troy Davig, 2008. "An empirical assessment of the relationships among inflation and short- and long-term expectations," Research Working Paper RWP 08-05, Federal Reserve Bank of Kansas City.
  3. Jondeau, E. & Sedillot, F., 1998. "La prevision des taux longs français et allemands a partir d'un modele a anticipations rationnelles," Working papers 55, Banque de France.
  4. Sharon Kozicki & P.A. Tinsley, 2002. "Alternative sources of the lag dynamics of inflation," Research Working Paper RWP 02-12, Federal Reserve Bank of Kansas City.
  5. Eric Jondeau & Franck Sédillot, 1999. "Forecasting French and German long-term rates using a rational expectations model," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(3), pages 413-436, September.
  6. Antulio N. Bomfim & Glenn D. Rudebusch, 1997. "Opportunistic and deliberate disinflation under imperfect credibility," Working Papers in Applied Economic Theory 97-07, Federal Reserve Bank of San Francisco.
  7. Kozicki, Sharon & Tinsley, P. A., 2001. "Term structure views of monetary policy under alternative models of agent expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 149-184, January.
  8. Todd E. Clark & Michael W. McCracken, 2006. "Forecasting of small macroeconomic VARs in the presence of instabilities," Research Working Paper RWP 06-09, Federal Reserve Bank of Kansas City.
  9. P. A. Tinsley, 1998. "Short rate expectations, term premiums, and central bank use of derivatives to reduce policy uncertainty," Finance and Economics Discussion Series 1999-14, Board of Governors of the Federal Reserve System (U.S.).
  10. Sharon Kozicki & P.A. Tinsley, 2006. "Survey-Based Estimates of the Term Structure of Expected U.S. Inflation," Working Papers 06-46, Bank of Canada.
  11. Sharon Kozicki & P.A.Tinsley, 2001. "What do you expect? : imperfect policy credibility and tests of the expectations hypothesis?," Research Working Paper RWP 01-02, Federal Reserve Bank of Kansas City.
  12. Rautureau, Nicolas, 2004. "Measuring the long-term perception of monetary policy and the term structure," Research Discussion Papers 12/2004, Bank of Finland.
  13. Sharon Kozicki, 2001. "Implications of real-time data for forecasting and modeling expectations," Research Working Paper RWP 01-12, Federal Reserve Bank of Kansas City.
  14. Clark, Todd E. & Kozicki, Sharon, 2004. "Estimating equilibrium real interest rates in real-time," Discussion Paper Series 1: Economic Studies 2004,32, Deutsche Bundesbank, Research Centre.
  15. Christopher F. Baum & Meral Karasulu, 1997. "Credible Disinflation Policy in a Dynamic Setting," Boston College Working Papers in Economics 375, Boston College Department of Economics.

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