Assessing the Rationality of Survey Expectations: The Probability Approach
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Jörg Breitung
Summary
This paper considers popular methods for the quantification of survey expectations. We investigate the asymptotic properties of two variants of the probability approach originally suggested by Carlson and Parkin (1975). It is argued that the traditional method can be interpreted as an instrumental variable estimator that suffers from a severe loss of efficiency if the mean of the target variable is close to zero. The regression approach advocated by Pesaran (1984) can be seen as a special case assuming that expectations of survey participants are uniformly distributed. Applying alternative variants of these approaches to the ZEW survey of expected changes in the inflation rate demonstrates that the regression variant of the Carlson-Parkin methodology yields the best fit to the realized changes of the inflation rate. It turns out, however, that even the best performing quantification method fails to fulfill the requirement of rational expectations, as the variance of the expectation error is significantly reduced by including additional variables such as the lagged inflation rate.
© 2008 by Lucius & Lucius, Stuttgart
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- Contributions to Labormetrics: Guest Editorial
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- Two-Sided Learning with Applications to Labor Turnover and Worker Displacement
- Wages, Hours and Human Capital Over the Life Cycle
- The Phillips Curve and NAIRU Revisited: New Estimates for Germany
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- Relative Demand and Supply of Skills and Wage Rigidity in the United States, Britain, and Western Germany
- The Effects of Active Labor Market Programs in Germany: An Investigation Using Different Definitions of Non-Treatment
- Dynamic Panel Data Models with Spatial Correlation
- Assessing the Rationality of Survey Expectations: The Probability Approach
- Measuring Research Intensity from Anonymized Data: Does Multiplicative Noise with Factor Structure Save Results Regarding Quotients?
- Buchbesprechung / Book Review
Articles in the same Issue
- Inhalt
- Contributions to Labormetrics: Guest Editorial
- Abhandlungen / Original Papers
- Two-Sided Learning with Applications to Labor Turnover and Worker Displacement
- Wages, Hours and Human Capital Over the Life Cycle
- The Phillips Curve and NAIRU Revisited: New Estimates for Germany
- The Aging of the Unions in West Germany, 1980–2006
- The Causes and Consequences of Adopting a Works Council
- Company-Level Pacts for Employment
- Parental Background and Earnings: German Evidence on Direct and Indirect Relationships
- Relative Demand and Supply of Skills and Wage Rigidity in the United States, Britain, and Western Germany
- The Effects of Active Labor Market Programs in Germany: An Investigation Using Different Definitions of Non-Treatment
- Dynamic Panel Data Models with Spatial Correlation
- Assessing the Rationality of Survey Expectations: The Probability Approach
- Measuring Research Intensity from Anonymized Data: Does Multiplicative Noise with Factor Structure Save Results Regarding Quotients?
- Buchbesprechung / Book Review
