A Structural Analysis of Expectation Formation: Based on Business Surveys of French Manufacturing Industry (Lecture Notes in Economics and Mathematical Systems, 354)

Using panel data of individual firms drawn from French surveys, a structural analysis is developed to study the formation of production plans and the rationality of expectations. The production decision of a firm is defined as the optimal solution of a dynamic stochastic optimization problem. The empirical work amounts to recovering the structural parameters characterizing the model of the firm from estimates of the derived decision rule. The preceding analysis of production plans is based on the assumption that firms are rational. To justify this assumption, direct tests offer evidence that the Rational Expectations Hypothesis may not be rejected for quantity variables. Front Matter....Pages N1-XII Introduction....Pages 1-19 Front Matter....Pages 20-22 The Production Smoothing Model....Pages 23-45 The Econometric Specification Using Survey Data....Pages 46-86 The General Latent Variable Model with Discrete Data....Pages 87-111 The Empirical Analysis and Forecasting....Pages 112-139 Front Matter....Pages 140-142 On Testing the RE Hypothesis: A Survey....Pages 143-157 Surprise Variables and Expectational Errors....Pages 158-171 Direct Tests of the Rational Expectation Hypothesis....Pages 172-206 Conclusion....Pages 207-214 Back Matter....Pages 215-233