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Testing rationality of price expectations on the basis of contingency tables

Author

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  • Emilia Tomczyk

    () (Department of Applied Econometrics, Warsaw School of Economics)

Abstract

A method of analyzing rationality of expectations of economic agents, based on contingency tables, is applied to price expectations of Polish industrial enterprises. The source of data are surveys designed by the Economic Development Institute of the Warsaw School of Economics within the framework of business conditions surveys in industry. Empirical results clearly show that expectations of Polish entrepreneurs are not formed rationally. Rationality condition is confirmed in such a limited number of cases that it is not even feasible to differentiate between private and public enterprises as far as rationality of their expectations is concerned. Price expectations seem to be even more irrational than industrial production expectations analyzed earlier.

Suggested Citation

  • Emilia Tomczyk, 2007. "Testing rationality of price expectations on the basis of contingency tables," Working Papers 1, Department of Applied Econometrics, Warsaw School of Economics.
  • Handle: RePEc:wse:wpaper:1
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    File URL: http://kolegia.sgh.waw.pl/pl/KAE/struktura/IE/struktura/ZES/Documents/Working_Papers/aewp01-07.pdf
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    Citations

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    Cited by:

    1. Tomasz Łyziak, 2012. "Inflation expectations in Poland," NBP Working Papers 115, Narodowy Bank Polski, Economic Research Department.
    2. Tomasz Lyziak, 2014. "Inflation expectations in Poland, 2001–2013. Measurement and macroeconomic testing," NBP Working Papers 178, Narodowy Bank Polski, Economic Research Department.

    More about this item

    Keywords

    price expectations; rationality; survey data; contingency tables;

    JEL classification:

    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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