A Survey-Based Shifting-Endpoint Dynamic Term Structure Model of Interest Rates: Working Paper 2025-03

Michael McGrane

No 60888, Working Papers from Congressional Budget Office

Abstract: In this paper, I present a dynamic term structure model of interest rates that fea- tures a shifting endpoint and incorporates survey forecasts of interest rates to sharpen the model’s implied forecasts and estimate trend interest rates. I present a new esti- mate of trend interest rates from the model as well as the model’s estimates of term premiums. I conduct an out-of-sample forecast analysis with the model and find that it significantly outperforms a standard dynamic term structure model with no shifting endpoint and only slightly underperforms a random walk model.

JEL-codes: E43 E47 G12 (search for similar items in EconPapers)
Date: 2025-08-05
New Economics Papers: this item is included in nep-for and nep-mon
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