Business Cycles Analysis and Expectational Survey Data

What is the role of foresight, and the significance of the lack of foresight under uncertainty, in the theory of business cycles ? What relevant evidence on these questions can be extracted from the survey data on agents' expectations and experts' forecasts? To provide some answers, the recent work in this area is reviewed in the perspective of economic and doctrinal history. The address proceeds from (1) a discussion of the expectational aspects of modern business cycles theories and (2) a critique of the currently dominant approaches to (3) a summary of the evidence and (4) some illustrations and implications for further analysis. Of the conclusions drawn,perhaps the most general one is that expectations matter a great deal but are not all-important. They may be rational in the sense of effectively using the limited available knowledge and information, but they are also diversified and not always self-validating or stabilizing.

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