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Survey Evidence on the Muthian Rationality of the Inflation Forecasts of U.S. Consumers

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  • Baghestani, Hamid
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    Abstract

    Since January 1978, the University of Michigan Survey Research Center has been collecting the monthly year-ahead inflation forecasts of U.S. consumers. Following the implications of Muthian rational expectations, the author uses L. P. Hansen and R. J. Hodrick's procedure to examine whether these data are unbiased, and whether they outperform comparable nonsurvey augmented-adaptive and naive forecasts in terms of predictive information content. It is concluded that the survey data (unlike the nonsurvey forecasts) are biased. However, they contain more predictive information than that included in the naive forecasts but lack the predictive information contained in the forecasts generated from the augmented-adaptive Phillips curve type model. Copyright 1992 by Blackwell Publishing Ltd

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    Bibliographic Info

    Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

    Volume (Year): 54 (1992)
    Issue (Month): 2 (May)
    Pages: 173-86

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    Handle: RePEc:bla:obuest:v:54:y:1992:i:2:p:173-86

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    Cited by:
    1. Wilbert van der Klaauw & Wandi Bruine de Bruin & Giorgio Topa & Basit Zafar & Olivier Armantier, 2012. "Inflation Expectations and Behavior: Do Survey Respondents Act on their Beliefs?," 2012 Meeting Papers 121, Society for Economic Dynamics.
    2. Hasan Bakhshi & Anthony Yates, 1998. "Are UK inflation expectations rational?," Bank of England working papers 81, Bank of England.
    3. Gerberding, Christina, 2001. "The information content of survey data on expected price developments for monetary policy," Discussion Paper Series 1: Economic Studies 2001,09, Deutsche Bundesbank, Research Centre.
    4. John M. Roberts, 1994. "Is inflation sticky?," Working Paper Series / Economic Activity Section 152, Board of Governors of the Federal Reserve System (U.S.).
    5. Grant, Alan P. & Thomas, Lloyd B., 2001. "Supply shocks and the rationality of inflation forecasts," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(4), pages 515-532.
    6. Campbell III, Carl M., 2008. "An efficiency wage approach to reconciling the wage curve and the Phillips curve," Labour Economics, Elsevier, vol. 15(6), pages 1388-1415, December.
    7. Silva Lopes, Artur, 1994. "A "hipótese das expectativas racionais": teoria e realidade (uma visita guiada à literatura até 1992)
      [The "rational expectations hypothesis": theory and reality (a guided to      ," MPRA Paper 9699, University Library of Munich, Germany, revised 23 Jul 2008.

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