Are economic forecasts rational?

Michael Keane () and David E. Runkle

Quarterly Review, 1989, vol. 13, issue Spr, 26-33

Abstract: This paper discusses at an undergraduate level how forecast rationality can be tested. It explains that forecasters should correctly use any relevant information they knew in making their predictions. It shows that forecast rationality can be tested by determining whether the forecasters' prediction errors are predictable. After addressing what data and methods can be used for testing rationality, the paper presents tests of the price-forecast rationality of individual professional forecasters. Unlike results of previous studies, the test results show that those forecasters' price predictions appear to be rational.

Keywords: Forecasting; Rational expectations (Economic theory) (search for similar items in EconPapers)
Date: 1989
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Citations: View citations in EconPapers (14)

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