Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241127 
Year of Publication: 
2021
Series/Report no.: 
Staff Report No. 934
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Using a unique data set of individual professional forecasts, we document disagreement about the future path of monetary policy, particularly at longer horizons. The stark differences in short rate forecasts imply strong disagreement about the risk-return trade-off of longer-term bonds. Longer-horizon short rate disagreement co-moves with term premiums. We estimate an affine term structure model in which investors hold heterogeneous beliefs about the long-run level of rates. Our model fits U.S. Treasury yields and the short rate paths predicted by different groups of professional forecasters very well. About one-third of the variation in term premiums is driven by short rate disagreement.
Subjects: 
disagreement
heterogeneous beliefs
noisy information
speculation
survey forecasts
yield curve
term premium
JEL: 
D83
D84
E43
G10
G12
Document Type: 
Working Paper

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