The Curse of Irving Fisher (Professional Forecasters' Version)
Dynamic Euler equations restrict multivariate forecasts. Thus a range of links between macroeconomic variables can be studied by seeing whether they hold within the multivariate predictions of professional forecasters. We illustrate this novel way of testing theory by studying the links between forecasts of U.S. nominal interest rates, inflation, and real consumption growth since 1981. By using forecast data for both returns and macroeconomic fundamentals, we use the complete cross-section of forecasts, rather than the median. The Survey of Professional Forecasters yields a three-dimensional panel, across quarters, forecasters, and forecast horizons. This approach yields 14727 observations, much greater than the 107 time series observations. The resulting precision reveals a significant, negative relationship between consumption growth and interest rates.
|Date of creation:||Nov 2007|
|Contact details of provider:|| Postal: Kingston, Ontario, K7L 3N6|
Phone: (613) 533-2250
Fax: (613) 533-6668
Web page: http://qed.econ.queensu.ca/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Motohiro Yogo, 2004. "Estimating the Elasticity of Intertemporal Substitution When Instruments Are Weak," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 797-810, August.
- Donald W.K. Andrews & James H. Stock, 2005. "Inference with Weak Instruments," Cowles Foundation Discussion Papers 1530, Cowles Foundation for Research in Economics, Yale University.
- John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 205-251, April.
- John Y. Campbell & John H. Cochrane, 1994.
"By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior,"
CRSP working papers
412, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- John Y. Campbell & John H. Cochrane, 1994. "By force of habit: a consumption-based explanation of aggregate stock market behavior," Working Papers 94-17, Federal Reserve Bank of Philadelphia.
- Campbell, John & Cochrane, John H., 1999. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Scholarly Articles 3119444, Harvard University Department of Economics.
- John Y. Campbell & John H. Cochrane, 1995. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," NBER Working Papers 4995, National Bureau of Economic Research, Inc.
- Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-735, September.
- Carl S Bonham & Richard H Cohen, 2000. "Testing the Rational Expectations Hypothesis using Survey Data," Working Papers 200007, University of Hawaii at Manoa, Department of Economics.
- Croushore Dean, 2010.
"An Evaluation of Inflation Forecasts from Surveys Using Real-Time Data,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 10(1), pages 1-32, May.
- Dean Croushore, 2006. "An evaluation of inflation forecasts from surveys using real-time data," Working Papers 06-19, Federal Reserve Bank of Philadelphia.
- John Y. Campbell, 1986.
"Bond and Stock Returns in a Simple Exchange Model,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 101(4), pages 785-803.
- John Y. Campbell, 1984. "Bond and Stock Returns in a Simple Exchange Model," NBER Working Papers 1509, National Bureau of Economic Research, Inc.
- Campbell, John, 1986. "Bond and Stock Returns in a Simple Exchange Model," Scholarly Articles 3122544, Harvard University Department of Economics.
- Smith, Gregor W., 2009. "Pooling forecasts in linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 33(11), pages 1858-1866, November.
- Gregor W. Smith, 2007. "Pooling Forecasts in Linear Rational Expectations Models," Working Papers 1129, Queen's University, Department of Economics.
- Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
- Lloyd B. Thomas, 1999. "Survey Measures of Expected U.S. Inflation," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 125-144, Fall.
- Christopher D. Carroll, 2003. "Macroeconomic Expectations of Households and Professional Forecasters," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 269-298.
- Zarnowitz, Victor, 1985. "Rational Expectations and Macroeconomic Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 293-311, October.
- Neely, Christopher J & Roy, Amlan & Whiteman, Charles H, 2001. "Risk Aversion versus Intertemporal Substitution: A Case Study of Identification Failure in the Intertemporal Consumption Capital Asset Pricing Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 395-403, October.
- Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
- Nils Gottfries & Torsten Persson, 1988. "Empirical Examinations of the Information Sets of Economic Agents," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 251-259. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:qed:wpaper:1144. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Babcock)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.