| By: |
M. Hashem Pesaran;
Martin Weale |
| Abstract: |
This paper focuses 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 focuses
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. |
| Keywords: |
models of expectation formation, survey data, heterogeneity, tests of rational expectations |
| JEL: |
C40 C50 C53 C80 |
| Date: |
2005–08 |
| URL: |
http://d.repec.org/n?u=RePEc:cam:camdae:0536&r=exp |