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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 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.

Identiferoai:union.ndltd.org:BOSTON/oai:dlib.bc.edu:bc-ir_102352
Date January 2013
CreatorsRohde, Adam Robert
PublisherBoston College
Source SetsBoston College
LanguageEnglish
Detected LanguageEnglish
TypeText, thesis
Formatelectronic, application/pdf
RightsCopyright is held by the author, with all rights reserved, unless otherwise noted.

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