A Survey-Based Shifting-Endpoint Dynamic Term Structure Model of Interest Rates: Working Paper 2025-03
Working Paper
This working paper presents a dynamic term structure model of interest rates that features a shifting endpoint and incorporates survey forecasts of interest rates to sharpen the model’s implied forecasts and estimate trend interest rates.
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.
