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Moving endpoints and the internal consistency of agents' ex ante forecasts

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  • Sharon Kozicki
  • Peter 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.

Suggested Citation

  • Sharon Kozicki & Peter A. Tinsley, 1997. "Moving endpoints and the internal consistency of agents' ex ante forecasts," Research Working Paper 97-01, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:97-01
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