Replication data for: Testing for the Strong Form of Rational Expectations with Heterogeneously Informed Agents

These tests suffer from several conceptual shortcomings of a nontrivial nature. In this study, the meaning of RE is clarified, and also a test for strong rational expectations (SRE) where citizens possess heterogeneous information levels is set forth.

These empirical tests provide insights into what kinds of information citizens use in forming expectations from that which they do not utilize but could employ to arrive at more accurate forecasts. Using inflation expectations data for the period January 1978–December 1993, the empirical findings indicate that citizens can benefit from greater reliance on objective economic and political conditions when formulating their inflation expectations.