Rational Bias In Inflation Expectations
Thesis advisor: Robert Murphy === We empirically examine the Biased Expectations Hypothesis, which states that recent price movements in certain sectors play special roles in the formation of in- dividuals inflation expectations. Specifically we analyze whether economists rationally bias their expec...
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| Format: | Others |
| Language: | English |
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Boston College
2013
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| Online Access: | http://hdl.handle.net/2345/3093 |
| Summary: | Thesis advisor: Robert Murphy === We empirically examine the Biased Expectations Hypothesis, which states that recent price movements in certain sectors play special roles in the formation of in- dividuals inflation expectations. Specifically we analyze whether economists rationally bias their expectations and whether economists and consumers naively bias their ex- pectations with respect to recent inflation in the food and energy sectors. We develop theoretical models for both rationally formed and naively formed inflation expecta- tions. We find that economists do not bias their rationally formed expectations and that consumers and economists do not naively form inflation expectations. Our results do not support the Biased Expectations Hypothesis; rather, they reinforce the use of core measures of inflation in policy making. === Thesis (BA) — Boston College, 2013. === Submitted to: Boston College. College of Arts and Sciences. === Discipline: Economics Honors Program. === Discipline: Economics. |
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