The idea of rational expectations has revolutionized macroeconomics. Several authors believe that the idea can be easily tested by a simple econometric procedure. This paper, however, presents several reasons for questioning the relevance of such tests.

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An abstract for this article is not available.

An abstract for this article is not available

It is inappropriate to ignore the behavior of money in explaining the generation and evolution of aggregate inflation over time. It is shown that over the period 1977 to 1987 an inflation model based on M2 demand describes more accurately the actual behavior of inflation than an...

An abstract for this article is not available.

An abstract for this article is not available.

Forecasters experienced considerable difficulty in recognizing rising inflation and predicting its intensity in 1972-82. Possible explanations discussed are: 1) unpredictable supply shocks, 2) excessive attention to nonmonetary developments, and 3) actual money growth overshooting its targeted...