Are U.K. Inflation Expectations Rational?

Bank of England Working Paper No. 81

39 Pages Posted: 24 Aug 1998

See all articles by Hasan Bakhshi

Hasan Bakhshi

Bank of England - Monetary Analysis

Anthony Yates

Bank of England - Monetary Analysis

Date Written: 1998

Abstract

This paper tests for unbiasedness in inflation expectations drawn from a survey of U.K. employees by Gallup. It focuses on the econometric difficulties presented by having a small sample, there being overlapping forecast horizons, and by trying to make inference when the data appear to be non-stationary. Applying a method of inference suggested by Inder (1993) the paper concludes that measured expectations systematically overstate inflation. The paper checks the robustness of this result by looking at alternative survey data and by using alternative techniques for modelling the long run.

JEL Classification: E31

Suggested Citation

Bakhshi, Hasan and Yates, Anthony, Are U.K. Inflation Expectations Rational? (1998). Bank of England Working Paper No. 81, Available at SSRN: https://ssrn.com/abstract=115789 or http://dx.doi.org/10.2139/ssrn.115789

Hasan Bakhshi (Contact Author)

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom
020 7601 5996 (Phone)

Anthony Yates

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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