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Do Bankers Make Rational Economic Forecasts?

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  • Muzafar Shah Habibullah

Abstract

In the last decade, there has been an increasing interest in the hypothesis of how expectations are formed by economic agents. Recently, many applied studies have tested the implications of the hypothesis of rational expectations on survey data. This paper provides empirical evidence on the rationality of economic forecasts made by bankers in a developing economy. The ‘unbiasedness’ and efficiency tests’ results cannot reject the rationality of economic forecasts made by bankers in Malaysia with respect to gross revenue and employment, but not capital expenditure.

Suggested Citation

  • Muzafar Shah Habibullah, 2005. "Do Bankers Make Rational Economic Forecasts?," The IUP Journal of Bank Management, IUP Publications, vol. 0(4), pages 7-15, November.
    • Handle: RePEc:icf:icfjbm:v:04:y:2005:i:4:p:7-15
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    References listed on IDEAS

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    1. Lovell, Michael C, 1986. "Tests of the Rational Expectations Hypothesis," American Economic Review, American Economic Association, vol. 76(1), pages 110-124, March.
    2. Mayes, David G., 1981. "The Controversy Over Rational Expectations," National Institute Economic Review, National Institute of Economic and Social Research, vol. 96, pages 53-61, May.
    3. G. S. Maddala, 1991. "Survey Data on Expectations: What Have We Learnt?," International Economic Association Series, in: Marc Nerlove (ed.), Issues in Contemporary Economics, chapter 12, pages 319-344, Palgrave Macmillan.
    4. Engle, R. F. & Granger, C. W. J. (ed.), 1991. "Long-Run Economic Relationships: Readings in Cointegration," OUP Catalogue, Oxford University Press, number 9780198283393, Decembrie.
    5. Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
    6. Fischer, Andreas M, 1989. "Unit Roots and Survey Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 451-463, November.
    7. Leonard, Jonathan S, 1982. "Wage Expectations in the Labor Market: Survey Evidence on Rationality," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 157-161, February.
    8. Madsen, Jakob B, 1993. "The Formation of Production Expectations in Manufacturing Industry for Nine Industrialized Countries," Empirical Economics, Springer, vol. 18(3), pages 501-521.
    9. Mullineaux, Donald J, 1978. "On Testing for Rationality: Another Look at the Livingston Price Expectations Data," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 329-336, April.
    10. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
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    Cited by:

    1. Puah, Chin-Hong & Wong, Shirly Siew-Ling & Habibullah, Muzafar Shah, 2012. "Rationality of business operational forecasts: evidence from Malaysian distributive trade sector," MPRA Paper 37599, University Library of Munich, Germany.

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