In this paper we test the Rational Expectations hypothesis using longitudinal data on expectations and realizations of individual welfare for East Germans in the years following reunification. German reunification was unexpected and delivered a large shock to the future prospects of the...

This paper examines the expectations behavior of individual responses in the surveys of the Survey of Professional Forecasters and the University of Michigan's Survey Research Center. The paper finds that respondents consistently revise their forecasts of inflation, unemployment, and other key...

This paper studies dynamic discrete choices by relaxing the assumption of rational expectations. That is, agents' subjective expectations about the state transition are unknown and allowed to differ from their objectively estimable counterparts. We show that agents' subjective expectations and...

In this paper, we build a new test of rational expectations based on the marginal distributions of realizations and subjective beliefs. This test is widely applicable, including in the common situation where realizations and beliefs are observed in two different datasets that cannot be matched....