Interest Rate Expectations Versus Forward Rates: Evidence From An Expectations Survey / Benjamin M. Friedman.

Format:

Book

Author/Creator:

Friedman, Benjamin M.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0295.

NBER working paper series no. w0295

Language:

English

Subjects (All):

Interest rate futures.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Interest Rate Expectations Versus Forward Rates

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1978.

Cambridge, Mass. : National Bureau of Economic Research, 1978.

Summary:

The 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

Notes:

Print version record

October 1978.