Are Survey Forecasts of Macroeconomic Variables Rational?

JOURNAL OF BUSINESS, 1995, Vol 68, No 1

Posted: 25 Oct 1999

See all articles by Frank M. Song

Frank M. Song

The University of Hong Kong - School of Economics and Finance

Raj Aggarwal

University of Akron; Federal Reserve Banks - Federal Reserve Bank of Cleveland

Sunil Mohanty

University of St. Thomas - Opus College of Business

Abstract

This article examines the rationality of forecasts of 11 macroeconomic variables. Among the nonstationary series, only surveys of housing starts, the unemployment rate, and the trade balance are rational forecasts. Among the stationary series, survey forecasts for only consumer prices and personal income are consistent with rational expectations. Lack of rationality in forecasts of durable goods, industrial production, leading indicators, money supply, and retail sales suggests that such forecasts do not fully exploit public information. Indeed, survey forecasts for industrial production and retail sales can be improved significantly with past information.

JEL Classification: G1, G14

Suggested Citation

Song, Frank M. and Aggarwal, Raj and Mohanty, Sunil K., Are Survey Forecasts of Macroeconomic Variables Rational?. JOURNAL OF BUSINESS, 1995, Vol 68, No 1. Available at SSRN: https://ssrn.com/abstract=6170

Frank M. Song (Contact Author)

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Raj Aggarwal

University of Akron ( email )

Akron, OH 44325-4803
United States

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Sunil K. Mohanty

University of St. Thomas - Opus College of Business ( email )

1000 LaSalle Avenue
TMH 443
Minneapolis, MN 55403
United States

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