To investigate this question go to the web site of

This preview shows 3 out of 4 pages.

Are people’s inflation forecasts rational? To investigate this question, go to the Web site of the Federal Reserve Bank of Philadelphia at . Find the Web pages for Research & Data and look for data spanning from 1982:Q2 to 2008:Q4 from the Survey of Professional Forecasters (SPF) on forecasts of CPI inflation (Median Responses). Use the column “CPI2” that gives the sequence of current-quarter forecasts. Then, go to FRED and get data on quarter-to-quarter CPI inflation. Make a plot showing the forecast of inflation at a given date on the horizontal axis against the actual inflation rate on the vertical axis. If forecasts are rational, what pattern should you see in the data? What pattern do you observe in your plot? Does the evidence support the idea that people’s inflation forecasts are rational? See attached figure 3
Image of page 3

Subscribe to view the full document.

8 6 on 4 ual inflatio 2 Actu 0 -2 -4 -2 0 2 4 6 8 Forecasts of inflation Figure 1: Forecasts of Inflation and Actual Inflation Rate, 1982-2008 4
Image of page 4
You've reached the end of this preview.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern