Variable parameter estimation of consumer price expectations for the South African economy

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Periodical article

Title:	Variable parameter estimation of consumer price expectations for the South African economy
Author:	Koekemoer, Reneé
Year:	2001
Periodical:	South African Journal of Economics
Volume:	69
Issue:	1
Pages:	1-39
Language:	English
Geographic term:	South Africa
Subjects:	consumer prices consumers
External link:	https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2001.tb00001.x/pdf
Abstract:	Expectations, i.e. anticipations or views of the future, have featured prominently in the macroeconomic literature from the inception of the concept. Historically, there have been two distinct methods of dealing with expectations in economic analysis - one is the direct measuring of expectations, the other is the specification of a simple model of expectations formation. In this study, the latter method is adopted: a simple model of expectations formation is specified and the coefficient vector of the expectations rule is treated as an unobservable component. This method is used to test the hypothesis that consumers in South Africa are forward-looking with respect to prices when making consumption expenditure decisions. Furthermore, the study tested the assumption that consumers learn from expectation errors made in the past. Both hypotheses are confirmed by the analysis. Bibliogr.