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Expectations Hypothesis (expectation + hypothesis)
Selected AbstractsAnchoring Economic Predictions in Common KnowledgeECONOMETRICA, Issue 2 2002R. Guesnerie The paper examines within a unified methodology expectational coordination in a series of economic models. The methodology views the predictions associated with the Rational Expectations Hypothesis as reasonable whenever they can be derived from the more basic Common Knowledge Hypothesis. The paper successively considers a simple non-noisy N -dimensional model, standard models with "intrinsic" uncertainty, and reference intertemporal models with infinite horizon. It reviews existing results and suggests new ones. It translates the formal results into looser but economically intuitive statements, whose robustness, in the present state of knowledge, is tentatively ascertained. [source] A Semiparametric Analysis of the Term Structure of the US Interest Rates,OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 4 2009Fabrizio Iacone Abstract The short end of the US$ term structure of interest rates is analysed allowing for the possibility of fractional integration and cointegration. This approach permits mean-reverting dynamics for the data and the existence of a common long run stochastic trend to be maintained simultaneously. We estimate the model for the period 1963,2006 and find it compatible with this structure. The restriction that the data are I(1) and the errors are I(0) is rejected, mainly because the latter still display long memory. This result is consistent with a model of monetary policy in which the Central Bank operates affecting contracts with short term maturity, and the impulses are transmitted to contracts with longer maturities and then to the final goals. However, the transmission of the impulses along the term structure cannot be modelled using the Expectations Hypothesis. [source] Testing the Expectations Hypothesis of the Term Structure of Interest Rates in the Presence of a Potential Regime ShiftTHE MANCHESTER SCHOOL, Issue 2003Markku Lanne The expectations hypothesis of the term structure of interest rates is tested with monthly Eurodollar deposit rates for maturities of 1, 3 and 6 months covering the period 1983:1,1999:6. Classical regression based tests indicate rejection, while tests in a new model allowing for potential regime shifts that have not occurred in the sample period lend support to the expectations hypothesis. The results imply that the potential regime shift affected the expectations concerning the longer-term interest rate only in a short period at the beginning of the sample when the interest rates were highest. [source] The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro AreaGERMAN ECONOMIC REVIEW, Issue 2 2006Alain Durré Expectations hypothesis; money market; liquidity premium; cointegration analysis Abstract. This paper investigates to what extent the expectations hypothesis of the term structure (EHTS) of interest rates receives some support since the launch of the European single currency. Empirical evidence shows that in general this theory applies to most European countries, and to Germany in particular. The objective of this paper thus is twofold. First, the EHTS for the German money market and for a larger sample including the German mark period and the euro money market is tested in order to check whether the results for the former are affected by the new financial environment since January 1999. Second, the implications of the results for the monetary policy assessment are discussed. We estimate cointegrating vector autoregressive models in order to quantify the level of the liquidity premium. The results suggest that financial markets do not consider the monetary policy of the European Central Bank simply as the one prevailing during the German period. [source] Predicting the signs of forecast errorsJOURNAL OF FORECASTING, Issue 5 2010Nazaria Solferino Abstract The signs of forecast errors can be predicted using the difference between individuals' forecasts and the average of earlier forecasts of the same variable. It is possible to improve forecasts without worsening any. It is difficult to reconcile this result with the rational expectations hypothesis because the average of earlier forecasts is in the information set of the forecasters. Copyright © 2009 John Wiley & Sons, Ltd. [source] Strategic bias and professional affiliations of macroeconomic forecastersJOURNAL OF FORECASTING, Issue 2 2009Masahiro AshiyaArticle first published online: 19 SEP 200 Abstract This paper investigates strategic motives of macroeconomic forecasters and the effect of their professional affiliations. The ,wishful expectations hypothesis' suggests that a forecaster predicts what his employer wishes. The ,publicity hypothesis' argues that forecasters are evaluated by both accuracy and ability to generate publicity, and that forecasters in industries that emphasize publicity most will make most extreme and least accurate predictions. The ,signaling hypothesis' asserts that an extreme forecast signals confidence in own ability, because incompetent forecasters would mimic others to avoid public notice. Empirical evidence from a 26-year panel of annual GDP forecasts is con-sistent with the publicity hypothesis. This indicates that conventional tests of rationality are biased toward rejecting the rational expectations hypothesis. Copyright ? 2008 John Wiley & Sons, Ltd. [source] The Chinese interbank repo market: An analysis of term premiumsTHE JOURNAL OF FUTURES MARKETS, Issue 2 2006Longzhen Fan Because of the lack of short-term government bonds, the interbank repo market in China has been providing the best information about market-driven short-term interest rates since its inception. This article examines the behavior of the repo rates of various terms and their term premiums. The work in this article supplements the study by F. Longstaff (2000), which reports supportive evidence for the pure expectations hypothesis over the short range of the term structure with the use of repo data from the United States. It is found that the pure expectations hypothesis is statistically rejected, although the term premiums are economically small. It is shown that the short-term repo rate, repo rate volatility, repo market liquidity, and repo rate spreads are all important in determining the term premiums. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:153,167, 2006 [source] Testing the Expectations Hypothesis of the Term Structure of Interest Rates in the Presence of a Potential Regime ShiftTHE MANCHESTER SCHOOL, Issue 2003Markku Lanne The expectations hypothesis of the term structure of interest rates is tested with monthly Eurodollar deposit rates for maturities of 1, 3 and 6 months covering the period 1983:1,1999:6. Classical regression based tests indicate rejection, while tests in a new model allowing for potential regime shifts that have not occurred in the sample period lend support to the expectations hypothesis. The results imply that the potential regime shift affected the expectations concerning the longer-term interest rate only in a short period at the beginning of the sample when the interest rates were highest. [source] Strategic bias and professional affiliations of macroeconomic forecastersJOURNAL OF FORECASTING, Issue 2 2009Masahiro AshiyaArticle first published online: 19 SEP 200 Abstract This paper investigates strategic motives of macroeconomic forecasters and the effect of their professional affiliations. The ,wishful expectations hypothesis' suggests that a forecaster predicts what his employer wishes. The ,publicity hypothesis' argues that forecasters are evaluated by both accuracy and ability to generate publicity, and that forecasters in industries that emphasize publicity most will make most extreme and least accurate predictions. The ,signaling hypothesis' asserts that an extreme forecast signals confidence in own ability, because incompetent forecasters would mimic others to avoid public notice. Empirical evidence from a 26-year panel of annual GDP forecasts is con-sistent with the publicity hypothesis. This indicates that conventional tests of rationality are biased toward rejecting the rational expectations hypothesis. Copyright ? 2008 John Wiley & Sons, Ltd. [source] | ||||||||||