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Abstract

This paper focusses on survey expectations and discusses their uses for testing and modeling of expectations. Alternative models of expectations formation are reviewed and the importance of allowing for heterogeneity of expectations is emphasized. A weak form of the rational expectations hypothesis which focusses on average expectations rather than individual expectations is advanced. Other models of expectations formation, such as the adaptive expectations hypothesis, are briefly discussed. Testable implications of rational and extrapolative models of expectations are reviewed and the importance of the loss function for the interpretation of the test results is discussed. The paper then provides an account of the various surveys of expectations, reviews alternative methods of quantifying the qualitative surveys, and discusses the use of aggregate and individual survey responses in the analysis of expectations and for forecasting.

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Paper provided by National Institute of Economic and Social Research in its series NIESR Discussion Papers with number 260.

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Date of creation: Jul 2005
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Handle: RePEc:nsr:niesrd:260

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Find related papers by JEL classification:

• B0 - Schools of Economic Thought and Methodology - - General

This paper has been announced in the following NEP Reports:

• NEP-ALL-2005-10-29 (All new papers)
• NEP-FOR-2005-10-29 (Forecasting)

References

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