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

  • Kozicki, Sharon
  • Tinsley, P A

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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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
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100248

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