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- Title
RATIONAL EXPECTATIONS, INFORMATIONAL EFFICIENCY, AND TESTS USING SURVEY DATA: A REPLY.
- Authors
Figlewski, Stephen; Wachtel, Paul
- Abstract
The article presents the authors' response to an article by economists J. Kimball Dietrich and Douglas H. Joines, related to relational expectations, informational efficiency and tests using survey data. According to the authors, the availability of survey data on inflationary expectations provides a ready opportunity to test for the rationality of expectations. There have been several studies which utilize the Livingston survey data for such tests. Usually the tests entail, among other things, regressing the actual rate of inflation on the expected rate of inflation and testing the null hypothesis that the constant term is zero and the slope coefficient is unity. According to the authors, Dietrich and Joines' analysis of the differences in the coefficient estimates as an errors-in-variables problem is fundamentally incorrect. Their examination of the issue as presented in the article implies that expectations formation with imperfect information should more appropriately be viewed as a case with omitted variables in which least squares is a consistent estimator. Their regression specification with the individual forecasts is, therefore, preferred to a regression using the survey means.
- Subjects
ECONOMIC forecasting; RATIONAL expectations (Economic theory); PRICE inflation; EMPIRICAL research; ESTIMATION theory; STATISTICAL correlation; TIME &; economic reactions
- Publication
Review of Economics & Statistics, 1983, Vol 65, Issue 3, p529
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1924204