Survey Evidence on The Rationality of Interest Rate Expectations

Benjamin M. Friedman

No 261, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: An analysis of predictions of six interest rates over 3-months-ahead and 6-months-aheadhorizons, surveyed regularly over eight years, casts doubt on the hypothesis that market participants' expectations are 'rational' in Muth's sense. Tests show that the survey respondents did not make unbiased predictions, that (especially for the 6-months-ahead predictions) they did not efficiently exploit the information contained in past interest rate movements, that their respective 3-months-ahead and 6-months-ahead predictions failed to be consistent in the sense required for 'rationality', and that (for long-term but not short-term interest rates) their predictions failed to exploit efficiently the information contained in common macroeconomic and macro-policy variables other than the money stock.

Date: 1980-12
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

Published as Friedman, Benjamin M. "Survey Evidence on the Rationality of Interest Rate Expectations." Journal of Monetary Economics, Vol. 6, No. 4, (October 1980) , pp. 453-465.

Downloads: (external link)
http://www.nber.org/papers/w0261.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:0261

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w0261

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().