Formation of Price and Cost Inflation Expectations in British Manufacturing Industries: A Multi-Sectoral Analysis
AbstractThe process by which agents form expectations on price and cost inflation is investigated. Measures of expectations of these series, derived from qualitative survey responses in nine industrial sectors covering U.K. manufacturing between 1972 and 1989, are described, and the rationality of these expectations tested. Rationality is not rejected in many sectors and the evidence against rationality much weakened in other sectors, if tests take into account a particular form of conversion error. The possible effect of aggregation bias in the tests is noted, as rationality is rejected with more confidence with aggregated data than when the sectoral data is considered individually. Copyright 1994 by Royal Economic Society.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 104 (1994)
Issue (Month): 423 (March)
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- Mitchell, James, 2002. "The use of non-normal distributions in quantifying qualitative survey data on expectations," Economics Letters, Elsevier, vol. 76(1), pages 101-107, June.
- Yusuf Soner Baskaya & Hakan Kara & Defne Mutluer, 2008. "Expectations, Communication and Monetary Policy in Turkey," Working Papers 0801, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- Nilss Olekalns & Kalvinder Shields, 2008. "Nowcasting, Business Cycle Dating and the Interpretation of New Information when Real Time Data are Available," Department of Economics - Working Papers Series 1040, The University of Melbourne.
- Tobias F. Rötheli, 1999. "Selling prices and profits: what survey data tell about firms' rationality," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 319-325.
- Lui, Silvia & Mitchell, James & Weale, Martin, 2011. "The utility of expectational data: Firm-level evidence using matched qualitative-quantitative UK surveys," International Journal of Forecasting, Elsevier, vol. 27(4), pages 1128-1146, October.
- Hasan Bakhshi & Anthony Yates, 1998. "Are UK inflation expectations rational?," Bank of England working papers 81, Bank of England.
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