While inflation expectations have recently come to play a major role in both macroeconomic theorizing and stabilization-policy analysis, relatively little work has been done to date on testing models that purport to explain how forecasters form inflation anticipations. This paper attempts to begin to fill that lacuna by exploiting data on expected inflation recently published by John Carison (1977a). These data are briefly described in Section I. Section II examines the relationship between inflation expectations and a number of factors commonly believed to influence the actual rate of inflation, such as the money growth rate, a number of fiscalpolicy-related variables, and the unemployment rate. Also considered is the question of whether the expectations generating process has shifted over time. Section III examines the question of whether forecasters efficiently employ available information in generating inflation predictions. The final section summarizes the results and considers the policy-related implications.
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