Experts' Interest Rate Expectations Challenge Traditional Economic Models, Impacting Market Dynamics.
Experts' expectations about interest rates in the Eurofranc market don't always follow the rational expectations theory. They use a mix of different models and factors like prices, income, and money to make predictions. These expectations match the relationship between long-term and short-term assets in a portfolio, with the risk premium depending on the variance of the short-term asset and its relationship with inflation. The results show that experts' expectations align with the theory of interest rate structures.