NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Survey Evidence on The Rationality of Interest Rate Expectations

Benjamin M. Friedman

NBER Working Paper No. 261 (Also Reprint No. r0128)
Issued in December 1980
NBER Program(s):   ME

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.

download in pdf format
   (163 K)

email paper

This paper is available as PDF (163 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0261

Published: 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.

Users who downloaded this paper also downloaded these:
Mishkin w0693 Monetary Policy and Short-Term Interest Rates: An Efficient Markets-Rational Expectations Approach
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us