Premium
The Formation of Producers' Price Expectations in Australia *
Author(s) -
SAUNDERS PETER
Publication year - 1981
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1981.tb01072.x
Subject(s) - economics , rational expectations , rationality , econometrics , alternative hypothesis , microeconomics , financial economics , null hypothesis , political science , law
This paper investigates the formation of price expectations by Australian manufacturing firms. It is shown that the reported expectations are generally consistent with the hypothesis that they are derived as conditional forecasts from the model used by firms in determining their actual price change behaviour. Tests are then undertaken to see whether the expectations are unbiased and efficient forecasts, the cross‐section results indicating generally that they are neither, and hence not rational. Alternative time‐series tests of the unbiasedness and efficiency hypothesis, however, suggest that neither hypothesis can be rejected, implying rationality.