Can households form consistent/convergent and unbiased expectation of interest rate?

Abstract

Expectation reliability remains a question. In this article, we test whether the households could form unbiased expectation of interest rate. From the Survey of Consumer Finance (SCF), we find that the majority of households hold higher interest rate expectation, and by simple t-test, the interest rate movement in 5 years does not support such expectation. Additional evidence from the Survey of Economic Expectations (SEE) confirms that it is hard to accept that the households could form unbiased expectation of interest rate.

Keywords:

• interest rate
• expectation
• survey
• t-test

JEL Classification:

• D84
• E49