Expectation formation processes: Some empirical evidence from survey data

Three expectation formation models are tested by means of log–linear models using observed entrepreneurial behaviour as manifested in the qualitative business surveys of the Bureau for Economic Research. The three formulations are (i) extrapolative expectations, (ii) adaptive expectations and (iii) an error-learning expectation formation model. Results are presented for ten variables for the total industrial sector and disaggregated into capital and consumer goods industries, business cycle phases and high and low concentration industries.