Do markets learn to rationally expect US interest rates? An anchoring approach
We propose an augmented and dynamic forecast anchoring model to examine whether a group of rational forecasters coexists with or emerges besides a group of forecasters employing heuristic rules. This model is consistent with the economically rational expectations theory. Using experts' 3-month...
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| Veröffentlicht in: | Applied economics 2018-12, Vol.50 (59), p.6458-6480 |
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| container_title | Applied economics |
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| creator | Prat, Georges Uctum, Remzi |
| description | We propose an augmented and dynamic forecast anchoring model to examine whether a group of rational forecasters coexists with or emerges besides a group of forecasters employing heuristic rules. This model is consistent with the economically rational expectations theory. Using experts' 3-month and 10-year Treasury bill rate survey expectations at short and long horizons, we find that aggregate expectations fail to exhibit a learning process towards rationality. While forecasters essentially anchor their judgements to heuristics, a small proportion of agents rationally forecast the short-term interest rate, possibly due to Federal Reserve's transparency practice in the conduct of monetary policy and forward guidance at the zero lower bound. |
| doi_str_mv | 10.1080/00036846.2018.1486024 |
| format | Article |
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| ispartof | Applied economics, 2018-12, Vol.50 (59), p.6458-6480 |
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| language | eng |
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| source | Business Source Complete |
| subjects | dynamic heterogeneity Economic analysis Economic models Economic theory Economics and Finance Expectation formation Experts forecast anchoring Forecasting Heuristic Humanities and Social Sciences Interest rates Learning learning rationality Markets Monetary policy Rational expectations Rationality Transparency Treasury bills |
| title | Do markets learn to rationally expect US interest rates? An anchoring approach |
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