ARE SURVEY FORECASTS OF MACROECONOMIC VARIABLES RATIONAL

This article examines the rationality of forecasts of 11 macroeconomic variables. Among the nonstationary series, only surveys of housing starts, the unemployment rate, and the trade balance are rational forecasts. Among the stationary series, survey forecasts for only consumer prices and personal income are consistent with rational expectations. Lack of rationality in forecasts of durable goods, industrial production, leading indicators, money supply, and retail sales suggests that such forecasts do not fully exploit public information. Indeed, survey forecasts for industrial production and retail sales can be improved significantly with past information.