IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/1378.html
   My bibliography  Save this paper

Business Cycles Analysis and Expectational Survey Data

Author

Listed:
  • Victor Zarnowitz

Abstract

What is the role of foresight, and the significance of the lack of foresight under uncertainty, in the theory of business cycles ? What relevant evidence on these questions can be extracted from the survey data on agents' expectations and experts' forecasts? To provide some answers, the recent work in this area is reviewed in the perspective of economic and doctrinal history. The address proceeds from (1) a discussion of the expectational aspects of modern business cycles theories and (2) a critique of the currently dominant approaches to (3) a summary of the evidence and (4) some illustrations and implications for further analysis. Of the conclusions drawn,perhaps the most general one is that expectations matter a great deal but are not all-important. They may be rational in the sense of effectively using the limited available knowledge and information, but they are also diversified and not always self-validating or stabilizing.

Suggested Citation

  • Victor Zarnowitz, 1984. "Business Cycles Analysis and Expectational Survey Data," NBER Working Papers 1378, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1378
    Note: EFG
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w1378.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sargent, Thomas J, 1976. "A Classical Macroeconometric Model for the United States," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 207-237, April.
    2. Robert G. King & Charles I. Plosser, 1982. "The Behavior of Money, Credit, and Prices in a Real Business Cycle," NBER Working Papers 0853, National Bureau of Economic Research, Inc.
    3. Solow, Robert M, 1980. "On Theories of Unemployment," American Economic Review, American Economic Association, vol. 70(1), pages 1-11, March.
    4. Frederic S. Mishkin, 1983. "Are Market Forecasts Rational?," NBER Chapters, in: A Rational Expectations Approach to Macroeconometrics: Testing Policy Ineffectiveness and Efficient-Markets Models, pages 59-75, National Bureau of Economic Research, Inc.
    5. Gramlich, Edward M, 1983. "Models of Inflation Expectations Formation: A Comparison of Household and Economist Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(2), pages 155-173, May.
    6. Pesando, James E, 1975. "A Note on the Rationality of the Livingston Price Expectations," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 849-858, August.
    7. Rendigs Fels & C. Elton Hinshaw, 1968. "Forecasting and Recognizing Business Cycle Turning Points," NBER Books, National Bureau of Economic Research, Inc, number fels68-1, March.
    8. Brunner, Karl & Meltzer, Allan H., 1976. "The Phillips curve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 1-18, January.
    9. Hall, Robert E., 1980. "Labor supply and aggregate fluctuations," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 12(1), pages 7-33, January.
    10. Robert Eisner, 1978. "Factors in Business Investment," NBER Books, National Bureau of Economic Research, Inc, number eisn78-1, March.
    11. William Poole, 2001. "Expectations," Review, Federal Reserve Bank of St. Louis, vol. 83(Mar), pages 1-10.
    12. Marc Nerlove, 1958. "Adaptive Expectations and Cobweb Phenomena," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 72(2), pages 227-240.
    13. Sanford J. Grossman, 1981. "An Introduction to the Theory of Rational Expectations Under Asymmetric Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(4), pages 541-559.
    14. Figlewski, Stephen & Wachtel, Paul, 1981. "The Formation of Inflationary Expectations," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 1-10, February.
    15. Tobin, James, 1977. "How Dead Is Keynes?," Economic Inquiry, Western Economic Association International, vol. 15(4), pages 459-468, October.
    16. Victor Zarnowitz, 1967. "An Appraisal of Short-Term Economic Forecasts," NBER Books, National Bureau of Economic Research, Inc, number zarn67-1, March.
    17. Frank de Leeuw & Michael J. McKelvey, 1981. "Price Expectations of Business Firms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 299-314.
    18. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, March.
    19. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    20. repec:nbr:nberre:0126 is not listed on IDEAS
    21. Friedman, Benjamin M., 1979. "Optimal expectations and the extreme information assumptions of `rational expectations' macromodels," Journal of Monetary Economics, Elsevier, vol. 5(1), pages 23-41, January.
    22. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    23. S. Fischer, 1975. "Long-Term Contracts, Rational Expectations and the Optimal Money Supply Rule," Working papers 166, Massachusetts Institute of Technology (MIT), Department of Economics.
    24. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
    25. Jacob A. Mincer & Victor Zarnowitz, 1969. "The Evaluation of Economic Forecasts," NBER Chapters, in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 3-46, National Bureau of Economic Research, Inc.
    26. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    27. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
    28. Arrow, Kenneth J, 1978. "The Future and the Present in Economic Life," Economic Inquiry, Western Economic Association International, vol. 16(2), pages 157-169, April.
    29. Waud, Roger N, 1976. "Asymmetric Policymaker Utility Functions and Optimal Policy Under Uncertainty," Econometrica, Econometric Society, vol. 44(1), pages 53-66, January.
    30. F. Thomas Juster, 1964. "Anticipations and Purchases: An Analysis of Consumer Behavior," NBER Books, National Bureau of Economic Research, Inc, number just64-1, March.
    31. William Poole, 1976. "Rational Expectations in the Macro Model," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 463-514.
    32. N. Gregory Mankiw & Julio J. Rotemberg & Lawrence H. Summers, 1985. "Intertemporal Substitution in Macroeconomics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 225-251.
    33. 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.
    34. Brunner, Karl & Cukierman, Alex & Meltzer, Allan H., 1980. "Stagflation, persistent unemployment and the permanence of economic shocks," Journal of Monetary Economics, Elsevier, vol. 6(4), pages 467-492, October.
    35. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    36. McNees, Stephen K, 1978. "The "Rationality" of Economic Forecasts," American Economic Review, American Economic Association, vol. 68(2), pages 301-305, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hugo Benítez-Silva & Debra Dwyer & Wayne-Roy Gayle & Thomas Muench, 2008. "Expectations in micro data: rationality revisited," Empirical Economics, Springer, vol. 34(2), pages 381-416, March.
    2. Feng Gao & Fengming Song & Jun Wang, 2009. "Rational or irrational expectations? Evidence from China's stock market," Journal of Risk Finance, Emerald Group Publishing, vol. 10(5), pages 432-448, November.
    3. Robert W. Rich & Joseph Tracy, 2003. "Modeling uncertainty: predictive accuracy as a proxy for predictive confidence," Staff Reports 161, Federal Reserve Bank of New York.
    4. B. Douglas Bernheim, 1990. "How Do the Elderly Form Expectations? An Analysis of Responses to New Information," NBER Chapters, in: Issues in the Economics of Aging, pages 259-286, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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 tour ," MPRA Paper 9699, University Library of Munich, Germany, revised 23 Jul 2008.
    2. John B. Taylor, 1983. "Rational Expectations Models in Macroeconomics," NBER Working Papers 1224, National Bureau of Economic Research, Inc.
    3. Victor Zarnowitz, 1982. "Expectations and Forecasts from Business Outlook Surveys," NBER Working Papers 0845, National Bureau of Economic Research, Inc.
    4. repec:eee:labchp:v:2:y:1986:i:c:p:1001-1035 is not listed on IDEAS
    5. Victor Zarnowitz, 1979. "Information, Measurement, And Prediction In Economics," NBER Working Papers 0318, National Bureau of Economic Research, Inc.
    6. Bennett T. McCallum, 1982. "Macroeconomics after a decade of rational expectations : some critical issues," Economic Review, Federal Reserve Bank of Richmond, vol. 68(Nov), pages 3-12.
    7. Benjamin M. Friedman, 1980. "Survey Evidence on The Rationality of Interest Rate Expectations," NBER Working Papers 0261, National Bureau of Economic Research, Inc.
    8. Gerunov, Anton, 2014. "Критичен Преглед На Основните Подходи За Моделиране На Икономическите Очаквания [A Critical Review of Major Approaches for Modeling Economic Expectations]," MPRA Paper 68797, University Library of Munich, Germany.
    9. Franz, Wolfgang, 1992. "Neuere makroökonomische Kontroversen," Discussion Papers, Series II 168, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    10. Zijp, R. van, 1990. "New classical monetary business cycle theory," Serie Research Memoranda 0058, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    11. Grossman, Herschel I., 1983. "The natural-rate hypothesis, the rational-expectations hypothesis, and the remarkable survival of non-market-clearing assumptions," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 19(1), pages 225-245, January.
    12. Victor Zarnowitz, 1983. "Rational Expectations and Macroeconomic Forecasts," NBER Working Papers 1070, National Bureau of Economic Research, Inc.
    13. James Chan-Lee, 1980. "A review of recent work in the area of inflationary expectations," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(1), pages 45-86, March.
    14. Snowdon, Brian & Vane, Howard R., 1996. "The development of modern macroeconomics: Reflections in the light of Johnson's analysis after twenty-five years," Journal of Macroeconomics, Elsevier, vol. 18(3), pages 381-401.
    15. Drissi, Ramzi & Ghassan, Hassan B., 2018. "Sticky Price versus Sticky Information Price: Empirical Evidence in the New Keynesian Setting," MPRA Paper 93075, University Library of Munich, Germany, revised Apr 2019.
    16. Latsos Sophia, 2018. "Real Wage Effects of Japan’s Monetary Policy," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 69(1), pages 177-215, July.
    17. Kenneth S. Rogoff, 1983. "The optimal degree of commitment to an intermediate monetary target: inflation gains versus stabilization costs," International Finance Discussion Papers 230, Board of Governors of the Federal Reserve System (U.S.).
    18. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050, Elsevier.
    19. N. G. Mankiw, 2009. "The Macroeconomist as Scientist and Engineer," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 5.
    20. J.P.G. Reijnders, 2007. "Impulse or propagation? How the tides turned in Business Cycle Theory," Working Papers 07-07, Utrecht School of Economics.
    21. Evans, George W. & Ramey, Garey, 2006. "Adaptive expectations, underparameterization and the Lucas critique," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 249-264, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1378. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.