Testing the rational expectations hypothesis - Using Norwegian microeconomic data

Abstract

The rational expectations hypothesis (REH) is tested directly using Norwegian microeconomic data on firms' expectations of the prices of own products in domestic and export markets and expectations of demand for own products in domestic and export markets. The data are taken from a survey of firms in manufacturing and mining. The data are qualitative and the tests have been carried out by the use of loglinear probability models and various measures of association. Three different tests are run, with differing results on behalf of the REH; the general conclusion is, however, a rejection of the REH.