Post by ehsanulh125 on Jan 9, 2024 6:56:09 GMT
Thanks to the work of Milton Friedman and Edmund Phelps, it has been known since the end of the 1960s how important the role of expectations is in shaping economic processes. Nevertheless, it was not clear for a very long time how economic actors form their expectations. Expectations are not directly observable, they are difficult to measure, so economists have set up hypotheses regarding economic expectations. The two most common views represent two extremes. The adaptive expectations hypothesis assumes that economic actors mechanically project the past onto the future, which requires minimal awareness. On the other hand, the rational expectations hypothesis assumes that the cognitive abilities of economic actors are extremely good and that they know exactly the laws describing the functioning of the economy, and based on this knowledge and all the information available to them, they form their expectations in a completely rational way.
Although expectations are Buy Bulk SMS Service not directly observable, we have had a considerable amount of information on economic expectations in the form of questionnaire surveys for a long time. [1] The question arises as to why economics did not use this source of information and instead relied on uncertain speculative hypotheses. The reason for this is that the majority of economists were convinced that the information contained in the surveys was not very valuable and could rather be considered noise. This belief was based on the assumption that since survey participants have no interest in telling the truth, they don't (typically these surveys are anonymous and there is no reward for participation or accurate predictions).
However, this attitude has changed significantly in the last decade, serious efforts have been made to analyze the information found in questionnaire surveys (see for example: Greenwood and Schleifer, 2014; Gennaioli, Ma and Shleifer, 2015; Baron and Xiong, 2017; Bordalo et al., 2017; López-Salido et al., 2017). These researches proved that the content of the surveys cannot be considered as random noise, they contain a significant amount of useful information, because the time series obtained from surveys from different sources and made with different methodologies correlate with each other and with the observable economic variables. Does the information obtained from questionnaire surveys support the adaptive expectations or the rational expectations hypothesis? The short answer is no, none.
Although expectations are Buy Bulk SMS Service not directly observable, we have had a considerable amount of information on economic expectations in the form of questionnaire surveys for a long time. [1] The question arises as to why economics did not use this source of information and instead relied on uncertain speculative hypotheses. The reason for this is that the majority of economists were convinced that the information contained in the surveys was not very valuable and could rather be considered noise. This belief was based on the assumption that since survey participants have no interest in telling the truth, they don't (typically these surveys are anonymous and there is no reward for participation or accurate predictions).
However, this attitude has changed significantly in the last decade, serious efforts have been made to analyze the information found in questionnaire surveys (see for example: Greenwood and Schleifer, 2014; Gennaioli, Ma and Shleifer, 2015; Baron and Xiong, 2017; Bordalo et al., 2017; López-Salido et al., 2017). These researches proved that the content of the surveys cannot be considered as random noise, they contain a significant amount of useful information, because the time series obtained from surveys from different sources and made with different methodologies correlate with each other and with the observable economic variables. Does the information obtained from questionnaire surveys support the adaptive expectations or the rational expectations hypothesis? The short answer is no, none.