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Survey Evidence on the Rationality of Expectations

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  • Ivaldi, Marc

Abstract

Data on expectations collected by business surveys offer the opportunity to test the rational expectation hypothesis. Tests directly based on qualitative data are not powerful because of the nature of the data. An alternative method is proposed in this paper. The author applies the usual orthogonality conditions of rationality to the unobservable variables which are assumed to trigger the categorical responses of surveys when they cross certain thresholds. To implement the test, an original estimation method for latent variable models using indicators is required. The results show that the Hypothesis is not always rejected for the expectations of changes in demand drawn from surveys of French manufacturing industry. Copyright 1992 by John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 7 (1992)
Issue (Month): 3 (July-Sept.)
Pages: 225-41

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Handle: RePEc:jae:japmet:v:7:y:1992:i:3:p:225-41

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Cited by:
  1. Das, J.W.M. & Soest, A.H.O. van, 2000. "Expected Versus Realized Income Changes: A Test of the Rational Expectation Hypothesis," Discussion Paper 2000-105, Tilburg University, Center for Economic Research.
  2. Yu, Ge, 2003. "Comparing Expectations and Outcomes: Application to UK Data," MPRA Paper 502, University Library of Munich, Germany, revised 2005.
  3. Catherine Doz, 1993. "Note sur les tests de rationalité des prévisions," Économie et Prévision, Programme National Persée, vol. 108(2), pages 129-133.
  4. repec:nsr:niesrd:287 is not listed on IDEAS
  5. 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.
  6. Pierre-Daniel G. Sarte, 2010. "Learning about informational rigidities from sectoral data and diffusion indices," Working Paper 10-09, Federal Reserve Bank of Richmond.
  7. Wärneryd, K., 1995. "Demystifying rational expectations theory through an economic-psychological model," Discussion Paper 1995-92, Tilburg University, Center for Economic Research.
  8. 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.
  9. Christian Müller & Eva Köberl, 2008. "Business Cycle Measurement with Semantic Filtering: A Micro Data Approach," KOF Working papers 08-212, KOF Swiss Economic Institute, ETH Zurich.
  10. Christian Müller & Aniela Wirz & Nora Sydow, 2007. "A Note on the Carlson-Parkin Method of Quantifying Qualitative Data Evidence Based on a New Data Set," KOF Working papers 07-168, KOF Swiss Economic Institute, ETH Zurich, revised May 2007.

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