Further evidence on the rationality of interest rate expectations

摘要: Abstract This paper extends the limited work on interest rate expectations to a previously unexploited data set that covers broad range of EMS and non-EMS foreign currency deposits. We corroborate earlier finding in literature forecasts are not rational agents do use all available information an efficient manner; this applies post-1990 period, thus questioning assertion Frankel Froot [Frankel, J.F., Froot, K.A., 1987a. Using survey test standard propositions regarding exchange expectations. American Economic Review 77, 151] “the nature rejection strongly depends sample period”. Although forecast errors rates smaller less volatile than rates, nevertheless biased.