On the Rationality of the General Public

Using Allensbach survey data about how people look forward to the coming year, we construct true ex-post forecasts and compare them with the forecasts produced by the German Council of Economic Experts and by the Economic Research Institutes. Then we perform rationality tests for these forecast series. The Allensbach forecasts outperform the professional forecasts in many respects. Finally we ask whether information included in short-term interest rates is reflected in the different forecasts. We show that the Allensbach forecasts seem to fully take into account this information, while the professional forecasts do not. Thus when making expectations, the German general public seems to consider more information than the professional forecasters.