the fisher hypothesis and the forecastability and persistence of inflation abstract for the period 1860 to 1939 the simple correlation of the u s commercial paper rate with the contemporaneous inflation rate is 0 17 the corresponding correlation for the period 1950 to 1979 is 0 71 this paper attributes this apparent change in the fisher relation to differences in the stochastic process of inflation rather than a change in any structural relationship between interest rates and expected inflation contrary to recent claims in the literature there is little evidence of inflation non neutrality in data from the pre world war i period

causes of the forward bias non rational expectations versus risk premia the sources of the systematic forward bias in the foreign exchange market are sought a theoretical framework based on some well known international parity conditions is developed in order to derive testable hypotheses these are a only risk premia account for the observed deviations between forward and future sport rate c anticipated real exchange rate changes explain part of the bias the provided evidence is not consistent with any of these hypotheses which in turn implies that part of the bias may be due to non rational expectations

methodical madness technical analysis and the irrationality of exchange rate forecasts substantial empirical research documents that exchange rate forecasts are not formed rationally this paper identifies a common technical trading signal the head and shoulders pattern as a potential source of departures from rationality in exchange rate forecasts forecasts based on this pattern are evaluated for daily dollar exchange rates over 1973 to 1994 using two criteria for rationality profitability and efficiency resulting profits replicable in real time are tested for statistical significance using a bootstrap technique we find that the rule is profitable but not efficient since it is dominated by simpler trading rules

rational expectations as long run equilibria tests for indian securities abstract it is recommended that the standard bias test for muth rational expectations should be augmented in the form of a dynamic model amongst other advantages this approach permits the researcher to test unbiasedness as a long run equilibrium of the underlying dynamic adjustment process relating expectations to realizations the approach is applied to a new data set on traders expectations in the madras stock exchange although bias is generally found in the short run the long run equilibrium is consistent with rational expectations in about half the cases studied significant steady state biases are indicated for the remainder

inflation and reputation in many macroeconomic models with rational expectations optimal policy is time inconsistent and therefore announced policy may not be credible this paper models the government s credibility explicitly using kreps and wilson s analysis time consistent optimal government policy emerges as a sequential equilibrium in a repeated game this policy is at least as good as the inconsistent optimal policy and dominates the consistent policy when reputational effects are ignored thus the analysis resolves the problem of specifying a credible optimal policy in such models the results show why attempts to disinflate may lead to recession even with perfectly flexible prices this abstract was borrowed from another version of this item

uncovering financial market expectations of inflation this paper seeks to uncover market expectations of inflation from the joint dynamics of nominal interest rates and observed inflation i postulate 1 the existence of a stable vector autoregression in unobserved variables and 2 efficient financial markets the estimation procedure requires no further structural assumptions the econometrician need not observe all the information used by agents in forming forecasts or all the variables that influence real interest rates i find no empirical evidence that economic recessions are correlated with inflation forecast errors however postwar recessions are associated with ex ante real interest rates that are twice the postwar average

are outcomes driving expectations or the other way around an i 2 cvar analysis of interest rate expectations in the dollar pound market abstract this paper uses consensus forecasts to address empirical puzzles in international macro using the cointegrated var model the data consisting of three month libor rates their three month ahead forecasts prices and exchange rates for the us and uk were all found to be near i 2 consistent with imperfect knowledge expectations the i 2 analysis showed that over the medium run the nominal exchange rate has moved away from equilibrium values with interest rates following suit whereas over the long run the nominal exchange rate was adjusting while the interest rate forecasts pushed the system away from steady state evidence of self reinforcing feedback mechanisms in the system signals the importance of speculative bubbles for the determination of the exchange rate and the interest rates

was the deflation during the great depression anticipated evidence from the commodity futures market futures prices were well above spot prices for most commodities during most of the great depression evidently the spectacular declines in agricultural prices caught many people by surprise based on the historical correlations between commodity prices and consumer prices commodity markets anticipated stable consumer prices during the first year of the great depression the dramatic drop in nominal treasury bill yields thus should be read as a drop in ex ante real rates later in the great depression markets anticipated deflation but not as severe as actually occurred copyright 1992 by american economic association

predictability in financial markets what do survey expectations tell us abstract there is widespread evidence of excess return predictability in financial markets for the foreign exchange market a number of studies have documented that the predictability of excess returns is closely related to the predictability of expectational errors of excess returns in this paper we investigate the link between the predictability of excess returns and expectational errors in a much broader set of financial markets using data on survey expectations of market participants in the stock market the foreign exchange market the bond market and money markets in various countries the results are striking first in markets where there is significant excess return predictability expectational errors of excess returns are predictable as well with the same sign and often even with similar magnitude this is the case for foreign exchange stock and bond markets second in the only market where excess returns are generally not predictable the money market expectational errors are not predictable either these findings suggest that an explanation for the predictability of excess returns must be closely linked to an explanation for the predictability of expectational errors

a comparison of models of long term inflationary expectations abstract this paper compares several models of long term inflationary expectations including time series models models drawn from interest rate relationships and a structural model developed from a portfolio balance framework their within sample performance over 1961 1974 and out of sample performance over periods covering 1975 1982 are compared evaluation criteria include accuracy of forecasts and ability to capture changes in the trend of long term inflation the structural model is judged best its forecasts are generally the most accurate and it performs well in periods of rising and falling inflation an attribute not present in other models

inflation forecast errors and time variation in term premia the expectations theory of the term strueture is well known to give wrong signals as to the future course of long term interest rates one explanation involves rational time varying term premia however the anomaly may also be due to inflation forecast errors we study survey forecasts of inflation it seems that the respondents forecasts are insufficiently adaptive interest rates reflect expectations similar to the inflation forecasts as a result past survey forecast errors reliably predict premia on u s government bonds

can futures market data be used to understand the behavior of real interest rates this paper examines whether futures market data can be used to understand the behavior of real interest rates several ways of examining the data indicate that futures market data are not particularly informative about real interest rates not only does this evidence cast some doubt on results in previous research that make use of futures market data to draw inferences about real interest rates but it also indicates that future research on real interest rates may need to turn to a different line of attack understanding the behavior of real interest rates is a central issue in financial economics in previous research on this topic several approaches have been used to measure real interest rates in one approach real interest rates have been calculated by subtracting survey data on inflation expectations such as the livingston data from nominal interest rates the problem with survey based measures of real interest rates is that they are only as good as the survey measure of inflation expectations and there may be little incentive for the survey respondents to answer accurately an even more telling criticism of survey based measures often ignored in the literature is that the behavior of market expectations in driven by economic agents ai the margin who are eliminating unexploited profit opportunities market expectations are unlikely therefore to be well measured by the average expectations of survey respondents 2 because of doubts about survey based measures of real interest rates other

the soviet energy conservation dilemma abstract we have made an extensive analysis of the structure of energy use in the ussr since 1960 based on this work we find that the opportunities for energy conservation in the ussr are truely enormous were the energy intensities of the major activities in the ussr to fall to the levels of western europe energy use in the ussr in 1985 would have been one third lower than it actually was the problems in obtaining increased efficiencies are more institutional than technical the ussr has had little economic incentive to invest in more efficient energy use energy prices are determined by a central pricing authority and have not kept pace with world energy prices or with the costs of domestic energy production the dilemma for the ussr is that energy inefficiency is really a product of all the other inefficiencies in the soviet economy and can only improve if the entire economy improves changes in the mix of goods produced could also lower soviet energy use in industry and for freight however economic reform may also bring a surge in the demand for personal mobility home comfort and greater activity in the service sector important sectors of energy growth in the west thus economic structural change in the ussr will be a two edged sword

the structure of residential energy demand in greece abstract this paper attempts to shed light on the determinants of residential energy demand in greece and to compare it with some other oecd countries from the estimates of the short run and long run elasticities of energy demand for the period 1965 1999 we find that residential energy demand appears to be price inelastic also we do not find evidence of a structural change probably because of the low efficiency of the energy sector we find however that the magnitude of the income elasticity varies substantially between greece and other oecd countries

a note on exchange rate expectations and nominal interest differentials a test of the fisher hypothesis this note tests the hypothesis that nominal interest differentials between similar assets denominated in different currencies can be explained entirely by the expected change in the exchange rate over the holding period this proposition often called the fisher open hypothesis or the hypothesis of perfect asset substitutability has been a major component of recent theories of exchange rate determination and has important implications for monetary policy 1 the fisher hypothesis differs from the covered interest parity theorem enunciated by keynes 11 while covered interest parity equates the nominal interest differential between financial centers to a known premium or discount on forward foreign exchange and is thus in principle riskless fisher parity involves risk in an essential way the two conditions are equivalent only when forward exchange rates equal expected future spot rates recent theoretical work for example that of grauer litzenberger and stehle 8 kouri 12 and frankel 6 shows that this need not be the case when market participants are risk averse thus while covered interest parity must always hold exactly in an informationally efficient asset market with no transactions costs fisher parity need not nominal interest differentials may reflect risk premia in addition to expected exchange rate movements 2 it should be emphasized at the outset that the tests conducted in this paper are really joint tests of the fisher hypothesis and a weak form of foreign exchange market informational efficiency levich 14 has argued that tests of market efficiency are always joint tests involving some hypothesized structure of normal equilibrium returns below we assume informational efficiency and instead test fisher s hypothesized arbitrage condition that nominal interest differentials equal expected percentage changes in exchange rates

a simple account of the behavior of long term interest rates recent empirical research on the term structure of interest rates has shown that the long term interest rate is well described by a distributed lag on short term interest rates but does not conform to the expectations theory of the term structure it has been suggested that the long rate overreacts to the short rate this paper presents aunified taxonomy of risk premia or deviations from the expectations theory this enables the hypothesis of overreaction to be formally stated it is shown that if anything the long rate has underreacted to the short rate however the independent movement of the long rate is primarily responsible for the failure of the expectations theory

expectation formation mechanisms profitability of foreign exchange trading and exchange rate volatility an attempt is made to identify the expectation formation mechanism dominating the foreign exchange market and to demonstrate that exchange rate volatility can be attributed to the heterogeneity of traders with respect to expectation formation the criterion used to identify the dominance of a particular mechanism is the profitability of trading based on that mechanism it is concluded that mixed and extrapolative expectations are the dominant mechanisms that market participants follow some sort of a herd behaviour and that they pay attention to the expectations of other participants it is also found that the heterogeneity of market participants with respect to expectation formation goes a long way towards explaining volatility

information rigidities and exchange rate expectations abstract sluggish adjustment of expectations to new information is rational in an environment characterized by information costs and signal to noise problems this paper investigates the role of such information rigidities for exchange rate expectations using data from consensus economics for ten emerging and industrial economies from 1999 until 2015 our results confirm the importance of rigidities and show that the inclusion of forecast updates largely accounts for otherwise detected biases in expectation errors moreover we find little evidence for a systematic effect of fundamentals or uncertainty measures on exchange rate disagreement

prospects for non opec oil supply abstract the political and economic importance which has been attached to the oil industry in recent decades relates to the rapid increase in the demand for oil over the period from 1950 1980 and to the dominant role played by the politically volatile middle east in its supply although global demand for oil has grown little over the last decade during which period the role of middle east supplies has fallen both relatively and absolutely contemporary conventional wisdom on the future of oil envisages the reestablishment of middle east supply dominance this paper will challenge the validity of this view in the context of a realistic evaluation of the longterm demand prospects for the commodity

using survey data to test standard propositions regarding exchange rate expectations survey data provide a measure of exchange rate expectations superior to the forward rate in that no risk premium interferes we estimate extrapolative adaptive and regressive models of expectations static or random walk expectations and bandwagon expectations are rejected current appreciation generates the expectation of future depreciation because variables other than the contemporaneous spot rate receive weight in comparing expectations to the process governing the spot rate we find statistically significant bias no variable is as ubiquitous in international financial theory and yet as elusive empirically as investors expectations regarding exchange rates in the past expectations have been modeled in an ad hoc way often by using the forward exchange rate there is however a serious problem with using the forward discount as the measure of the expected change in the exchange rate in that the two may not be equal the gap that may separate the forward discount and expected depreciation is generally interpreted as a risk premium most of the large empirical literature testing the unbiasedness of the forward exchange rate for example has found it necessary either arbitrarily to assume away the existence of the risk premium if the aim

the carry trade and fundamentals nothing to fear but feer itself the carry trade is the investment strategy of going long in high yield target currencies and short in low yield funding currencies recently this nave trade has seen very high returns for long periods followed by large crash losses after large depreciations of the target currencies based on low sharpe ratios and negative skew these trades could appear unattractive even when diversied across many currencies but more sophisticated conditional trading strategies exhibit more favorable payos we apply novel within economics binary outcome classication tests to show that our directional trading forecasts are informa tive and out of sample loss function analysis to examine trading performance the critical conditioning variable we argue is the fundamental equilibrium exchange rate feer expected returns are lower all else equal when the target currency is overvalued like traders researchers should incorporate this information when evaluating trading strategies when we do so some questions are resolved negative skewness is purged and market volatility vix is uncorrelated with returns other puzzles remain the more sophisticated strategy has a very high sharpe ratio suggesting market ineciency

exchange rate expectations and functional misspecification the authors employ the cooley prescott adaptive model to examine for functional misspecification in three commonly used exchange rate expectation models they also test for heterogeneity among forecasts the authors find no serious misspecification problem but some heterogeneity in expectations these test results are confirmed by various other regression specification tests copyright 1994 by mit press

international interest rate linkages and the exchange rate regime abstract return differentials between instruments denominated in canadian dollars and instruments denominated in american dollars are investigated the study compares the properties of return differentials in the period of fixed exchange rates during the 1960s and in the period of flexible exchange rates during the 1970s and 1980s both real and nominal return differentials are investigated the results indicate that the change in exchange rate regime is not associated with a change in the average level of ex post return differentials between canada and the united states models which predict ex ante return differentials from available information in a rational expectations framework show a surprisingly large amount of structural stability across the regime change the major impact of the flexible exchange rate regime is on the variance of ex post return differentials and not on the average level of ex post or ex ante return differentials jel e42 e58 g15

predicting currency fluctuations and crises do resident firms have an informational advantage the authors investigate whether resident enterprise managers have an informational advantage about the countries in which they work they propose a method for extracting information available to resident managers but unknown to investors and forecasters they rest their hypothesis of informational advantage using a unique data set the global competitiveness survey the survey asks local managers about their outlook for the country in which they reside they find that local managers do have useful private information local managers responses improve on conventional forecasts of future volatility and changes in the exchange rate which are based on economic fundamentals or interest rate differentials they find that the local business community perceived in advance the recent crises in the republic of korea russia and thailand but not those in indonesia and malaysia markets have had limited success predicting crises and might do better by drawing on private information available to resident enterprise managers who seem to know better than markets about future movements in exchange rates

energy development potential an analysis of brazil abstract this paper develops an indicator for the energy development potential edp of 27 brazilian states this indicator uses data on a state s infrastructure and its supply of and demand for energy the indicator measures the data for three periods the first part of the 1990s which is a period of low economic growth the first part of the 2000s which is a period of high economic growth but with a historical crisis in the brazilian energy sector and 2009 2011 which is a period of economic growth after the energy crisis using a factor analysis we are able to identify three factors for edp they are the demand for energy the supply of renewable energy and the supply of nonrenewable energy we use these factors to classify the brazilian states according to their edp and to perform an exploratory spatial data analysis esda by using the moran indicators and the local indicators of spatial association lisa

the time series properties of the risk premium in the yen dollar exchange market summary in this paper a var model is employed to construct a measure of the conditional expectations of the future yen dollar spot rate this measure allows us to examine the dynamics of an ex ante time series for the risk premium in the market the var model produces better forecasts than the survey responses for turbulent periods such as 1981 1982 and 1984 1985 the var generated expectations are then used to construct a risk premium time series this risk premium ieerie series seems to be more reliable than the ones obtained using either survey data on expectations of the future spot exchange rate or the ex post realized spot exchange rate tests on the risk premium series suggest that a risk premium was present but that it was virtually constant throughout the sample the conditional variance of the risk premium changed over time but its unconditional distribution seemed stable across subsamples despite these features the volatility of the series was substantial and varied considerably throughout the sample

tests of rationality neutrality and market efficiency a monte carlo analysis of alternative test statistics abstract this paper examines the small sample properties of three testing strategies used to analyze the rationality monetary neutrality and market efficiency hypotheses we focus on the original two step barro test of the mre hypothesis formed entirely from ols results a test that employs the correct variance covariance formulae for these two step estimates and mishkin s fimle testing framework each test is examined under likely model respecifications the findings highlight the extensive bias incurred by drawing inferences from simple unadjusted two step estimates and reveal the relative power of all tests in identifying alternatives to the null hypotheses

commodity own rates real interest rates and money supply announcements abstract this paper develops a measure of the real interest rate that is based on commodity own rates the rate at which one can contract to exchange units of a commodity today for units of the commodity in the future we use this measure to study the impact of money supply announcements on the real interest rate we find that money shocks have little effect on one and three month real interest rates however there is a strong positive relation between money shocks and six and twelve month real interest rates

on the consistency of short run and long run exchange rate expectations abstract this paper examines whether short term exchange rate expectations overreact by comparing them with long term expectations we develop a set of nonlinear restrictions linking expectations at different forecast horizons the restrictions impose consistency a property weaker than rationality we use exchange rate survey data to measure expectations and then test whether consistency holds the data show that a current positive exchange rate shock leads investors to expect a higher long run future spot rate when iterating forward their short term expectations than when thinking directly about the long run in this sense short horizon expectations may overreact to current exchange rate changes

improved energy efficiency in the industrialized countries past achievements co2 emission prospects abstract this paper explores the contribution which energy efficiency might make to future reductions in co 2 emissions trends in key energy use sectors and recent changes that may signal a slowdown in the rate of improvement of energy efficiency are examined the oecd countries reduced their energy use through greater efficiency by nearly 32 ej or 16 million bbl day oil equivalent between 1972 and 1985 but the pace of these improvements in energy use has begun to slow prospects for increased efficiency in each sector and the barriers to achieving those increases are discussed

market efficiency and cointegration an application to the sterling and deutschemark exchange markets abstract the assumption that the foreign exchange market is efficient that is that agents are risk neutral and use all available information rationally so that the forward exchange rate is an unbiased predictor of the future spot rate is a property often imposed in theoretical international macroeconomic models although a vast empirical literature has evolved to test market efficiency we use recent developments in the theory of cointegration to provide new methods of testing several aspects of foreign exchange market efficiency we ffind evidence inconsistent with market efficiency for both germany and the united kingdom

are foreign exchange forecasts rational an empirical note abstract this paper uses survey data drawn from a high inflation economy israel to directly test the rationality of foreign exchange forecasts the empirical evidence indicates that exchange rate expectations are not rational in the muthian sense

on the internal consistency of short term medium term and long term oil price forecasts we derive internal consistency restrictions on short medium and long term oil price forecasts we then analyse whether oil price forecasts extracted from the survey of professional forecasters spf conducted by the european central bank ecb satisfy these internal consistency restrictions we find that neither short term forecasts are consistent with medium term forecasts nor that medium term forecasts are consistent with long term forecasts using a more complex expectation formation structure featuring a distributed lag structure however we find stronger evidence of internal consistency of medium term forecasts with long term forecasts

the postwar stability of the fisher effect most research concerning the fisher relationship has concentrated on the magnitude and significance of the response of nominal interest rates to anticipated inflation recently attention has shifted to the stability of that response according to previous estimates the impact of anticipated inflation on interest rates varies substantially over time by extending a standard model to include tax and aggregate supply shock effects we are able to reduce such instability considerably our results also reveal that increased foreign demand for bonds lowers the interest rate

rational expectations in the foreign exchange market some survey evidence this paper uses a survey data set that includes a large cross section of currencies to test for the rationality of expectations in the foreign exchange market two standard tests are applied to the data first a test to determine if investors make systematic forecast errors second a test to determine if investors use all available information efficiently when they make their forecasts this paper s data set involves a more recent time period which saw more quiescent exchange rate changes than the 1980s this paper finds that participants in the foreign exchange market do make systematic forecast errors and do not always use all available information when forecasting this conclusion is similar to past research but is now extended to a broader range of currencies and more recent time period

fisher phillips friedman and the measured impact of inflation on interest a reply the purpose of this paper is to demonstrate that empirical findings which persistently appear to contradict the fisher hypothesis that the nominal rate of interest should rise by the full amount of an increase in anticipated inflation are due basically to a failure to control for changes in the real rate of interest that are associated with changes in anticipated inflation we are guided in our search for proper specification of a fisher equation by a simple general equilibrium model which is employed to derive the impact of a change in anticipated inflation upon nominal interest given the requirement that commodity money and labor markets remain in equilibrium in effect we depart from the empirical tradition which has grown up around testing of the fisher hypothesis that takes the real interest rate to be independent of anticipated inflation and argues that for anticipated inflation properly measured the data ought to support the fisher hypothesis 1

on the accuracy of time series interest rate and survey forecasts of inflation there has been much work examining and evaluating different methodologies in forecasting inflation for example fama 1975 1977 develops an interest rate model to predict the 1 monthahead rate of inflation using the cpi fama and gibbons 1982 1984 modify the interest rate model to account for a nonconstant real rate of interest and compare it to a univariate timeseries forecasting model and to the livingston forecasts carlson 1977a 1977b and others also analyze the consensus forecasts from the livingston survey pertaining to multiperiod forecasts of inflation pearce 1979 considered the livingston survey and time series forecasts our purpose in this paper is to investigate further the relative forecasting ability of three different methodologies in contrast to previous studies that have generally used the cpi to measure inflation our analysis uses the implicit gnp deflator this modification is motivated largely by the fact that calculations of the cpi inflat n rate often are distorted greatly by changes in relative prices e g blinder 1980 fischer 1981 this paper compares the accuracy of three different inflation forecasting procedures these include a univariate time series model an interest rate model based on the methodology of fama and gibbons and the median forecasts derived from the american statistical association national bureau of economic research survey the evidence presented is based on ex ante forecasts of quarterly inflation rates using the gnp deflator for the period 1970 11984 11 based on the evidence presented the general conclusion is that the survey forecasts provide the most accurate inflation forecasts

tests of rational expectations and no risk premium in forward exchange markets abstract this paper tests the simple efficiency hypothesis i e that traders have rational expectations and charge no risk premium in the forward exchange market it uses a statistical procedure which is consistent under a large class of heteroscedasticity and a set of data which takes into account the institutional features of the forward exchange market the results show that this procedure leads to stronger rejections of the simple efficiency hypothesis than do procedures using the standard assumption of homoscedasticity

inefficiency of foreign exchange markets and expectations survey evidence in recent years the finding of a bias has cast doubts on the efficiency of the forward exchange market a large survey of exchange rate expectations in the danish market shows that this inefficiency is mainly due to risk aversion in the market the results contradict the findings of surveys of us and uk forward exchange markets where contribution from biased expectations has been large

the expectations hypothesis new hope or illusory support abstract recent studies of the expectations hypothesis of the term structure ehts find evidence in favor of the ehts using post 1980s us data this has been attributed to the relative macro stability of this period and greater market efficiency using a panel of forecasts for 3 month interest rates for ten countries we test separately for ehts and rational expectations assuming rational expectations holds we find support for the ehts is illusory due to an off setting time varying term premia and non rational expectations previous forecast based studies suggest biased expectations tend to reinforce the effect of a time varying term premium this change can be understood in the context of fama s 2006 argument that markets tend to underestimate future spot rates during periods of long run increases and overestimate during declines

rational expectations and macroeconomic forecasts the article presents extensive results from testing for bias and serially correlated errors in a collection of time series of quarterly multiperiod forecasts for six variables including real gnp growth inflation and unemployment the analysis covers responses by 79 frequent participants in economic outlook surveys conducted regularly since 1968 it shows much greater incidence of apparently systematic errors for inflation than for the other variables also the tests are more favorable to composite group forecasts than to most of the individual forecast sets

inflation real returns and capital investment we find evidence for the hypothesis of mundell 1963 and tobin 1965 that the expected real return component of interest rates is negatively related to the expected inflation component in the mundell tobin model the variation in expected real returns is caused by the variation in expected inflation our evidence suggests however that the variation in expected real returns is more fundamentally an outcome of the capital expenditures process equilibrium expected real returns vary directly with capital expenditures in order to induce equilibrium allocations of resources between consumption and investment this positive relation between expected real returns and real activity which comes out of the real sector combines with a negative relation between expected inflation and real activity which is traced to the monetary sector thus inducing the negative relation between expected inflation and expected real returns predicted by mundell and tobin but explained in terms of a model much different from theirs

spatially uneven development and low carbon transitions insights from urban and regional planning the ageing of existing energy system infrastructure the threat of climate change and uncertainty in the movement of energy prices have resulted in a widespread agreement on the need for a transition to a low carbon energy system yet the nature of this transition i e what when how and where and its socio economic outcomes at different scales are not well understood the interdependence of the energy sector and economic growth has been mostly studied at the national level via some general equilibrium or econometric models whilst sub national studies at community or urban levels mostly focus on the governance of transitions hence we suggest that a regional perspective to energy policy and research promises to integrate these two approaches by providing a more robust and comprehensive understanding of the implications of low carbon transitions as well as contributing to the development of more effective policies by building on recent ideas on geographical aspects of energy transitions this article offers insights on the changing relationship between the spatial organisation of economic activities and energy systems and identifies tools and methods from urban and regional planning to help with the delivery of efficient and equitable policy outcomes

differential interpretation of information in inflation forecasts we test the hypothesis associated with a standard assumption in the theoretical literature on learning that economic agents interpret information identically we use a data set based on a survey o

biases in macroeconomic forecasts irrationality or asymmetric loss empirical studies using survey data on expectations have frequently observed that forecasts are biased and have concluded that agents are not rational we establish that existing rationality tests are not robust to even small deviations from symmetric loss and hence have little ability to tell whether the forecaster is irrational or the loss function is asymmetric we quantify the exact trade off between forecast inefficiency and asymmetric loss leading to identical outcomes of standard rationality tests and explore new and more general methods for testing forecast rationality jointly with flexible families of loss functions that embed quadratic loss as a special case an empirical application to survey data on forecasts of nominal output growth demonstrates the empirical significance of our results and finds that rejections of rationality may largely have been driven by the assumption of symmetric loss

do dollar forecasters believe too much in ppp this article extends earlier studies on exchange rate expectations formation by using new data and adding information about forecasters reliance on fundamental analysis for the first time we replicate the conventional result of nonrational expectations moreover biases in expectations are identified as professionals significantly believe too much in mean reversion mean being represented by purchasing power parity ppp when respondents are grouped on their reliance to fundamental analysis fundamentalists reveal an even stronger bias those who rely the least on fundamentals preferring technical analysis instead show a significantly smaller bias towards ppp in lieu of expecting too much trend extrapolation biased beliefs will grow stronger when the us dollar is further away from ppp finally the accuracy of the expectations is poor for both groups however we find directional forecasting ability

price expectations in the united states 1947 75 it is common to assume that expectations about future inflation influence economic behavior the behavior of an economic system over time is determined in part by the manner in which these expectations are formed theoretical and empirical investigations frequently utilize a hypothesis that agents forecast future inflation rates primarily on the basis of past inflation rates static adaptive extrapolative and regressive expectations adjustment schemes are examples of such forecasting rules 1 but such rules generally ignore the fact that individuals observe prices not inflation rates a change in observed prices can result from general price inflation but it may also result from transitory shocks to the price level or observation error similarly apparent changes in the general inflation rate may be purely transitory in nature or may signify the beginning of a trend a model of inflation expectations should admit the possibility of these different sources of price change and embody the natural human tendency to extrapolate seeming trends this paper examines the extent to which agents reported price expectations are consistent with such naive forecasting a multilevel adaptive expectations model is developed that takes observed prices as the information available to agents on the basis of these prices individuals revise their beliefs about not only the price level but also the underlying inflation rate and trend in the inflation rate when fitted to the livingston survey data the model appears to provide a unified explanation of price expectations in the united states from 1947 to 1975 this is contrasted with earlier investigations suggesting that expectations formation differed significantly in the periods before and after 1960

are foreign exchange forecasts rational new evidence from survey data abstract tests of rationality in foreign exchange markets have been inconclusive because of disagreement over the relevant asset pricing model this paper uses a newly available set of data on foreign exchange expectations to directly test the rationality of four foreign currency markets overall the results reject the rational expectations hypothesis

an integrated view of tests of rationality market efficiency and the short run neutrality of monetary policy abstract this paper analyzes an important class of models in which expectations play an important role topics included in the analysis are tests of 1 rationality of forecasts in either market or survey data 2 capital market efficiency 3 the short run neutrality of monetary policy and 4 granger causality in macroeconometric models the common elements of these tests are highlighted in particular cross equation tests for rationality or the short run neutrality of money are shown to be equivalent to more common regression tests in the literature these results demonstrate that the exact specification of the relevant information set used in rational forecasts is not necessary for the cross equation tests to have desirable asymptotic properties also discussed are the conditions for identification of coefficients and testability of hypotheses

testing the rationality of price forecasts new evidence from panel data this paper tests the rationality of individual price forecasts in a panel of professional forecasters here unlike in most previous studies rationality is not rejected the results here differ because 1 using individual forecasts avoids aggregation bias 2 comparison of forecasts to initial data avoids bias due to data revision 3 the professional forecasters have economic incentives to state their expectations accurately and 4 a new covariance matrix estimator consistent when forecast errors are correlated across individuals is used copyright 1990 by american economic association

new hope for the expectations hypothesis of the term structure of interest rates survey data on interest rate expectations permit separate testing of the two alternative hypotheses in traditional term structure tests that the expectations hypothesis fails and that expected future interest rates are ex post inefficient forecasts we find that the source of the spread s poor predictions of future interest rates varies with maturity at short maturities the expectations hypothesis fails at long maturities however changes in the yield curve reflect changes in expected future rates one for one an implication of the expectations hypothesis this result confirms earlier findings that long rates underreact to short rates but now it cannot be attributed to term premia if the attractiveness of an economic hypothesis is measured by the number of papers which statistically reject it the expectations theory of the term structure is a knockout most tests beginning with macaulay 1938 find no evidence supporting the expectations hypothesis 1 many cannot even reject statistically the alternative hypothesis that the spread between long and short rates contains no information about future interest rate changes 2 to make matters worse in u s postwar data future long rates tend to rise when short rates are above long rates since the expectations hypothesis would predict that long rates tend to fall the theory often does worse than even the naive model that future interest

rationality of survey data and tests for market efficiency in the foreign exchange markets abstract this paper tests the rational expectations hypothesis reh and the market efficiency hypothesis meh in the foreign exchange markets using survey data on expectations our results show that the spot exchange rates expected exchange rates and the forward rates all follow a random walk process hence the cointegration theory is employed to test the reh and meh all the test statistics support the reh but fail to support the meh we use survey data on expectations to identify the causes behind this failure of the meh jel f31 g14

why real interest rates were so low in the 1970 s the economic turmoil of the 1970 s resulted in record postwar increases in inflation unemployment and nominal interest rates yet it was declines that were hardest to explain the average real value of a share of common stock plummeted productivity growth evaporated real interest rates measured as the spread between nominal interest rates and the inflation rate turned negative see table 1 over the past decade an explosion has occurred in the amount of attention paid to the relationship between nominal and thus real interest rates and expected inflation rates a good deal of this effort has been directed toward empirical analysis of the fisher neutrality hypothesis that nominal rates respond one for one with expected inflation rates most empirical tests of the fisher hypothesis have been bivariate interest rates were regressed on a constant and on actual or expected inflation measures estimates of the impact of inflation on interest rates in these and even in extended models are often significantly below one are often statistically imprecise and tend to be unstable over time the middle column of table i reflects this the coefficient of inflation on nominal interest rates there drops from 0 78 to 0 59 in the latter 1970 s another branch of work on nominal interest rates has concentrated on the institutional impediments to the fisher hypothesis robert mundell and james tobin demonstrate that nominal rates change by a smaller amount than the expected inflation rate does when a real balance effect exists and money pays no interest michael darby and martin feldstein on the other hand argue that nominal rates should exhibit a greater thanunity response to expected inflation due to the nature of u s income tax laws 2 here i estimate the relation between interest rates expected inflation and real forces such estimates are required for evaluating the effects of inflation on saving investment the distribution of income and the redistribution of wealth to generate estimates of the net impact of these various factors on interest rates and to avoid the identification and simultaneity problems masked but not often remedied by instrumental variables techniques i employ only exogenous regressors to buttress the argument i examine the individual links in the chain which are summarized in the reduced form the novel aspect of the model presented in section i is its addition of aggregate supply shocks to the determination of interest rates i trace the reduction in the supply of complementary factor inputs in the 1970 s to a decline in the demand for capital and therefore in real interest rates the inclusion of this supply force along with expected inflation allows one to distinguish between two offsetting effects on interest rates the depressing effect on real rates through lower investment demand and the elevating effect on nominal rates of higher expected inflation the results in section ii not only strongly support the economic and statistical importance of supply shocks on real interest rates but also resolve some longstanding interest rate puzzles allowing for the impact of factor supply produces a significant estimated response to expected inflation for a sample that ends prior to late 1960 s the magnitude assistant professor school of business administration university of california berkeley i would like to thank george akerlof robert j gordon robert a meyer joe peek janet yellen the members of the economic analysis and policy seminar at berkeley participants at the nber conference on inflation and financial markets and anonymous referees for helpful comments data resources supplied data and computational services financial support was provided by the berkeley program in finance and nsf grant ses8109093 linda pacheco supplied able research assistance errors of omission or commission are my responsibility see william gibson david pyle john carlson and thomas cargill and robert meyer 2maurice levi and john makin derive the reducedform effect of expected inflation on nominal interest rates as a function of the structural parameters

commodity prices convenience yields and inflation abstract this paper provides evidence that the two leading principal components in a panel of 23 commodity convenience yields have statistically and quantitatively important predictive power for inflation even after controlling for unemployment gap and oil prices the results hold up in out of sample forecasts across forecast horizons and across g7 countries the convenience yields also explain commodity prices and can be seen as informational variables about future economic conditions as conveyed by the futures markets a bootstrap procedure for conducting inference when the principal components are used as regressors is also proposed

further evidence on exchange rate expectations abstract this paper considers a previously unexploited survey data set of exchange rate expectations which allows us to focus on differences between ems and dollar exchange rates we corroborate the earlier finding in the literature that exchange rate forecasts are not rational and that agents do not use all available information efficiently although extrapolative and adaptive expectations formation mechanisms describe non ems exchange rate expectations to a certain extent ems exchange rates forecasts seem to follow long run fundamentals more closely and would suggest that agents believe that ems exchange rate expectations undershoot their long run equilibrium values jel f31

does foreign exchange intervention matter the portfolio effect until recently there was an unusual degree of consensus among economists that intervention by central banks in the foreign exchange market did not offer an effective or lasting instrument for affecting the exchange rate at least not independently of monetary policy this consensus was largely shared among policymakers and participants in the financial markets as well the 1982 g 7 economic summit at versailles commissioned a study of intervention known as the jurgenson report which found that the effects were small and transitory at most we think that the time is ripe for new statistical testing of the question many policymakers and foreign exchange traders believe that the intervention operations that have taken place since the plaza agreement of september 1985 have had an effect especially when operations are coordinated moreover the theoretical case against the effectiveness of intervention is not as clear as a reading of the economics literature might suggest the academic literature is predicated on the distinction between intervention operations that are sterilized and those that are allowed to affect the money supply we study the intervention operations that actually took place between 1982 and 1988 regardless of whether they were sterilized however we do begin in section i with a review of the issues involved 2 there are two possible channels through which intervention whether sterilized or not can influence the foreign exchange rate the portfolio and the expectations channels intervention can even if sterilized influence exchange rates through the portfolio channel provided foreign and domestic bonds are considered imperfect substitutes in investors portfolios intervention operations that for example increase the current relative supply of mark to dollar assets which private investors are obliged to accept into their portfolios will force a decrease in the relative price of mark assets 3 intervention can also influence exchange rates regardless of whether foreign and domestic bonds are imperfect substitutes through the expectations channel the public information that central banks are intervening in support of a currency or are planning to intervene in the future may under certain conditions cause speculators to expect an increase in the price of that currency in the future speculators react to this information by buying the currency today bringing about the change in the exchange rate today in sections ii and iii we describe the econometric problems that arise in the standard portfolio balance estimation equation we derive an alternative portfolio balance dominguez kennedy school of government harvard university 79 j f kennedy street cambridge ma 02138 frankel department of economics university of california 787 evans hall berkeley ca 94720 we thank three anonymous referees for valuable comments and suggestions julia marsh and julia lowell for research assistance and franz scholl at the bundesbank jean pierre roth at the swiss national bank and officials at the u s treasury and the board of governors of the federal reserve system for making the daily intervention data available 1many of the econometric results finding little or no effect were reported in kenneth s rogoff 1984 and dale w henderson and stephanie sampson 1983 2for authoritative statements see henderson 1984 or maurice obstfeld 1990 3the exchange rate reaction to an increase in the relative supply of outside foreign assets may be reduced if there is an increase in their expected rate of return that induces a corresponding increase in demand

inflation and real interest rates on assets with different risk characteristics given the importance of ex ante real interest rates to economic decision making it is no surprise that much empirical research focuses on them 1 several recent studies find that the ex ante real returns for short term u s treasury securities are not constant and are negatively correlated both with inflation and with nominal interest rates this paper examines the extent to which these findings hold for assets of longer maturity are robust with respect to the choice of price index and are stable over time we expand the set of assets studied to include those of longer maturity both publicly and privately issued for two reasons first their ex ante real returns may differ substantially from that of a short term nominally riskless security second because longer maturity assets have risk characteristics closer to capital their ex ante real returns are potentially more relevant for investment and savings decisions we explore the use of various price indices because the index used in most studies the consumer price index severely overstates inflation during the 1970s as a result of its inappropriate treatment of residential housing costs 2 this overstatement casts doubt on an important finding of previous studies that there are long stretches of time during the 1970s when ex ante real rates are significantly negative given the existence of holding costs for the goods relevant to most price indices and the absence of a riskless real return no arbitrage conditions are violated by a negative ex ante real rate however its persistence is problematical because asset holders are typically assumed to have a positive rate of time preference which ensures a positive ex ante real rate in the long run we find that before 1979 a negative relationship of ex ante real rates both with inflation and with nominal interest rates appears for the longer maturity assets as well as the short term nominally riskless asset indeed the relationship grows

a comparison of inflation forecasts interest rate models provide slightly better monthly forecasts and substantially better eight and fourteen month forecasts of inflation than a univariate time series model the livingston surveys underestimate eight and fourteen month inflation rates especially during the high inflation period of 1978 81 in contrast eight and fourteen month inflation forecasts extrapolated from one month interest rates show little bias and track ex post eight and fourteen month inflation rates better than the survey forecasts

real and nominal interest rates under uncertainty the fisher theorem and the term structure this paper examines the relation between nominal and real interest rates and the nominal and real term structure under uncertainty we show that two separate risk terms cause the fisher theorem to fail one risk term is related only to the variability of money prices while the other is related to the purchasing power riskiness of the nominal bond monetary policy can affect the value of both these risk terms we also show that the pure expectations hypothesis of the term structure fails for both real and nominal bonds because of risk premia even if the economy is neutral with respect to monetary policy monetary policy can alter the nominal term structure

what really happened to u s bond yields analysts have been able to say surprisingly little about the sources of the very volatile yields of long term u s bonds in recent decades we used surveys of economists forecasts to decompose long term bond yields into expectations of future inflation expected real short term interest rates and the expected bond risk premium variation in the bond risk premium accounts for most of the variation in yields from period to period but declines in all three components have contributed to the decline in yields of the past decade and a half

using survey data to resolve the exchange risk exposure puzzle evidence from u s multinational firms while in previous literature foreign currency exposure is estimated to be surprisingly small and insignificant we question in this paper the rationality assumption and show that the traditional use of realized exchange rate changes to approximate unexpected currency shocks leads to a strong underestimation of the influence that exchange rates play in determining firm valuations in light of a unique survey data base of individual exchange rate expectations we distinguish between realized and unexpected foreign currency movements and find that half of our sample of 935 u s firms with real operations in foreign countries is significantly exposed to unexpected exchange rate movements in line with previously reported results foreign exchange risk exposure is found to become increasingly perceptible when the return horizon is lengthened the difference between the exposure to realized versus unexpected exchange rate movements is however decreasing when lengthening the horizon suggesting that the more market participants disagree about the future path of currency values the less investors and or managers are likely to use the publicly available forecasts in their pricing and hedging decisions

asymmetry complementarities and state dependence in federal reserve forecasts forecasts are a central component of policymaking the federal reserve s forecasts are published in a document called the greenbook previous studies of the greenbook s inflation forecasts have found them to be rationalizable but asymmetric if considering particular subperiods for example before and after the volcker appointment in these papers forecasts are analyzed in isolation assuming policymakers value them independently we analyze the greenbook forecasts in a framework in which the forecast errors for different variables are allowed to interact we find that allowing the losses to interact makes the unemployment forecasts virtually symmetric the output forecasts symmetric prior to the volcker appointment and the inflation forecasts symmetric after the onset of the great moderation

dollar jump fears 1984 1992 distributional abnormalities implicit in currency futures options abstract deutsche mark and yen futures options over 1984 1992 and 1986 1992 respectively are examined for deviations from the lognormal assumption underlying standard option pricing models two methods are used an atheoretic skewness premium and daily estimates of moments using a model for pricing american foreign currency futures options under systematic exchange rate jump risk substantial variation over time is found in all moments including implicit skewness and kurtosis the implicit abnormalities predict future abnormalities in log differenced dm futures prices but not yen the peso problem implications do not explain standard rejections of uncovered interest parity

consensus and uncertainty in economic prediction we define consensus as the degree of agreement among point predictions aimed at the same target by different individuals and uncertainty as the diffuseness of the corresponding probability distributions this distinction is made operational with the aid of the nber asa survey data on matched point and probabilistic forecasts of inflation and the rate of change in gross national product the means of the two sets of forecasts agree closely standard deviations of point forecasts tend to understate uncertainty as measured by standard deviations of the predictive probability distributions however these measures of consensus and uncertainty are on the whole positively correlated there is evidence that expectations of higher inflation generate greater uncertainty about inflation tests also favor the hypothesis that a rise in inflation uncertainty has adverse effects on real growth

what does the term structure tell us about future inflation abstract this empirical analysis indicates that for maturities of six months or less the term structure of nominal interest rates provides almost no information about the future path of inflation but does provide information about the term structure of real interest rates however as maturities lengthen to nine and twelve months the nominal term structure begins to contain information about future inflation but ceases to provide information about the real term structure these results are explained by differences in the relative variability of expected future inflation changes and real term structure slopes at different points in the term structure

the behavior of u s short term interest rates since october 1979 short term interest rates in the united states have been too high since october 1979 in the sense that both unconditional and conditional forecasts based on an estimated vector autoregression model summarizing the prior experience under predict short term interest rates during this period although a non structural model cannot directly answer the question of why this has been so comparisons of alternative conditional forecasts point to the post october 1979 relationship between the growth of real income and the growth of real money balances as closely connected to the level and pattern of short term interestrates this finding is consistent with the authors earlier conclusion based on analysis of a small structural macroeconometric model that the high average level of interest rates has been due to a combination of slow growth of nominal money supply and continuing price inflation which together have kept real balances small in relation to prevailing levels of economic activity this abstract was borrowed from another version of this item

an evaluation of survey exchange rate forecasts abstract a non parametric test of direction is employed to evaluate the survey forecasts provided by the money market services empirical results suggest that the forecasts are useful for predicting the direction of exchange rate changes the results are consistent with a weaker form of rationality than unbiasedness

equity and tradeoffs in a tax based incomes policy a tax based incomes policy tip is a tax incentive that tries to induce employers and or workers to reduce wage and or price increases it is intended as a complement to the basic anti inflation policy of gradual monetary deceleration and fiscal restraint its purpose is to reduce the capital stock and output loss that would otherwise accompany such a policy see my 1978 1979a articles this article is divided into two sections section i examines the capital stock and output loss under monetary deceleration that is uncomplemented by tip this loss is due primarily to wage growth inertia a central feature of modern capitalist economies such inertia provides not only the rationale for a tip on wage increases but also implies that special effort is required to assure that the design of a complete tip package is fair to labor section ii analyzes the tradeoffs confronting two alternative methods of making tip more equitable to labor profit and or price restraint insurance and a tip on price increases of the largest firms the original tip limited to wage increases at first glance is often perceived as unbalanced and inequitable this section tries to contribute to the development of a balanced equitable tip

volume volatility and the dispersion of beliefs i examine a two period noisy rational expectations model of a futures market and show that the dispersion of expectations about a weighted average of future prices measures both the additional volatility and the additional expected volume of trade associated with noisy information the role played by dispersion helps clarify several stylized facts concerning volume and price behavior specifically dispersion can be a factor contributing to the positive correlation between volume and absolute price changes and the positive correlation between consecutive absolute price changes article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the accuracy and rationality of uk inflation expectations some quantitative evidence 1987 the accuracy and rationality of uk inflation expectations some quantitative evidence applied economics vol 19 no 6 pp 819 828

what do economists know an empirical study of experts expectations for more than three decades economic columnist joseph a livingston has canvassed a panel of economists twice a year eliciting their six month and twelve month forecasts for more than a dozen key variables this study analyzes whether the experts predictions are unbiased and whether complete use was made of all relevant known information unbiasedness and completeness being necessary conditions for fully rational expectations little bias was found in either the half year or full year predictions but extensive underutilization of information particularly data on monetary growth occurred to prophecy is extremely difficult especially with respect to the future chinese proverb do economists expectations regarding key price and nonprice variables utilize all known relevant information in an unbiased efficient manner this is a worthy subject for research for several reasons properties of experts predictions likely form an upper bound for those of laymen further as john muth 14 has noted the character of dynamic processes is typically very sensitive to the way expectations are influenced by the actual course of events p 316 hence we need to know precisely how events do affect expectations finally the common practice of replacing a variable s generally unobserved expectation with a proxy based on its past values will be unbiased and will not cause bias in other

monetary factors in the great depression this paper examines the role of monetary policy in the early stages of the great depression and considers the mechanism whereby this policy may have affected real activity i conclude that the depression was preceded by a dramatic shift towards a highly contractionary monetary policy the economic impact of this policy seems unlikely to have come through the conventional keynesian channels of a shortage of liquidity and high ex ante real interest rates but instead may have operated through unanticipated deflation and after 1930 through the disruption of financial intermediation as a consequence of the banking panics

are perceptions of inflation rational some evidence for sweden this survey paper argues that walrasian markets and monetary exchan ge are alternative not complementary arrangements for coordinating economic activity that if one realizes this many informational anomalies and price rigidities that appear irrational in a walrasia n context can be understood as the outcome of maximizing behavior in a monetary economy and that the precautionary approach to modelin g the demand for money takes on a particular importance in this way of looking at things empirical evidence on the demand for money is cite d in support of this point of view which tends to reinstate the quantity of money as an important economic variable in contrast to the new classical vision of the economy whi ch downgrades money s importance this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

short term interest rates as predictors of inflation on testing the hypothesis that the real rate of interest is constant in an innovative and provocative paper in this review eugene fama presents evidence which appears to be consistent with the joint hypothesis that the real rate of interest ignoring taxes is a constant and that the market for u s treasury bills is efficient in the sense of embodying rational expectations those findings are strikingly at variance with a long list of previous studies which seemed to support the view that the real rate of interest varies over time and can be related to economic variables such as real output monetary policy and so forth 2 the methodologies which lead to these contradictory conclusions are quite different previous studies had followed the lead of irving fisher by relating nominal interest rates to distributed lags on past rates of inflation 3 these distributed lags are generally interpreted as approximations to the market s expected rate of inflation and thus any remaining variation is attributed to variation in the real rate 4 fama s methodology on the other hand draws on the fact that the difference between the market interest rate and the subsequently observed rate of inflation the ex post real interest rate consists by definition of the ex ante real interest rate plus a pure forecasting error 5 the hypothesis of market efficiency implies that these forecasting errors must be serially random thus observing ex post real rates is equivalent to observing ex ante real rates with random measurement error these errors of course confound the problem of identifying variation in the ex ante real rate in this paper we will argue that the relative magnitude of these measurement errors is such that the tests carried out by fama were not powerful enough to reject the joint hypothesis that the ex ante real rate is a constant and expectations are rational more powerful tests which are presented in this paper using the same data do lead to rejection of that hypothesis of course rejection

frequency bias in consumers perceptions of inflation an experimental study we investigate whether the perception of economy wide inflation is affected by the frequency with which various goods prices are observed we provide novel experimental evidence that consumers perceptions of aggregate inflation are systematically biased toward the perceived inflation rates of the frequently purchased items this frequency bias may affect consumers consumption and investment decisions and thus have important macroeconomic consequences it may also explain why consumers typically over estimate inflation in surveys during periods where frequently purchased non durable goods are inflating faster than durables