Interest Rate Expectations Versus Forward Rates: Evidence From An Expectations Survey
AbstractThe object of this paper is to test several familiar hypotheses about the relationship between the forward rates implied by the term structure and interest rate expectations, using the one ongoing systematic survey that samples market participants' expectations. The substitution of survey data for overidentified constructions removes the principal source of ambiguity that has plagued much of the earlier empirical literature of the term structure. Nevertheless, because of limitations in the available data, it is possible to perform these tests only for the very short end of the maturity spectrum. Section I briefly describes the nature of the interest rate expectations survey and the calculation of the forward rate series from observed term structure data. Sections II-V present the results of testing the hypotheses that the implied term premium is zero on average (II), that it varies systematically with interest rate levels (III), that it varies with outside asset supplies (IV), and that it varies with economic activity (V). Section VI summarizes the findings of these tests and discusses their implications
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0295.
Date of creation: Oct 1978
Date of revision:
Publication status: published as Friedman, Benjamin M. "Interest Rate Expectations Versus Forward Rates: Evidence from an Expectations Survey." The Journal of Finance, Vol. XXXIV, No . 4, (September 1979), pp. 965-973.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Franco Modigliani & Richard Sutch, 1967. "Debt Management and the Term Structure of Interest Rates: An Empirical Analysis of Recent Experience," Journal of Political Economy, University of Chicago Press, vol. 75, pages 569.
- Brunner, Karl & Meltzer, Allan H, 1972. "Money, Debt, and Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 951-77, Sept.-Oct.
- Hamburger, Michael J & Platt, Elliott N, 1975. "The Expectations Hypothesis and the Efficiency of the Treasury Bill Market," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 190-99, May.
- Stiglitz, Joseph E, 1970. "A Consumption-Oriented Theory of the Demand for Financial Assets and the Term Structure of Interest Rates," Review of Economic Studies, Wiley Blackwell, vol. 37(3), pages 321-51, July.
- Reuben A. Kessel, 1971. "The Cyclical Behavior of the Term Structure of Interest Rates," NBER Chapters, in: Essays on Interest Rates, Vol. 2, pages 337-390 National Bureau of Economic Research, Inc.
- Pierre-Olivier Gourinchas & Aaron Tornell, 1996.
"Exchange Rate Dynamics and Learning,"
Harvard Institute of Economic Research Working Papers
1771, Harvard - Institute of Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.