An examination of Swedish manufacturing data on real output and qualitative business tendency survey (BTS) responses from 1968 through 1998 reveals that survey-based attitude data typically improve the fit of simple autoprojective models of manufacturing output growth. It also turns out that traditional autoregressive distributed lag (ADL) models based on business survey data can provide more accurate one-quarter-ahead forecasts of output growth than naive alternatives. Another finding is that when BTS variables concerning ex post (ex ante) output growth are included in the empirical specifications, then no other ex post (ex ante) business survey variables seems to include any additional information about output growth.

This paper examines the applicability of the Kalman Filter technique to forecast future spot interest rates, based upon the expectation hypothesis of the term structure of interest rates, in the Australian bank bill market. In this approach, regression estimates are based on the last period's estimate together with data from the current period. In contrast to constant parameter models, this allows effective use of information underlying the process driving the evolution of the parameters. For the period tested, forecasting accuracy of such a time-varying parameter model shows marked improvement over a constant parameter model. Acknowledgements: I am particularly indebted to one anonymous referee for very insightful comments on the earlier versions of the paper, and would like to thank the editor, Rob Brown, for helpful suggestions. Australian Bank Bill Rate: Kalman Filter Approach A number of recent research studies have found that Treasury Bill futures provide a better indication of future spot rates than the forward rates implied by the current term structure of interest rates. Notable among these studies are Cole, Impson and Reichenstein [1991], Hafer,

Traders taking positions in the market as well as forecasters who provide professional expectations on the future path of financial variables have an incentive to observe the forecasts (trades) that are publicly disclosed by their peers. Most likely they are particularly affected by the forecasts (or trades) of the market player that has obtained the best performance in previous periods of forecasting (or trading). These beauty contest dynamics where peculiarly relevant in the context of survey expectations, where reputation measures performance. In this paper we first characterize heterogeneity in survey exchange rate expectations and explore the presence of behavioral rules. We observe how forecasters compromise in order to minimize errors, follow the consensus view and mimic the prediction patterns of the forecaster who was the best performing in the immediate past. We show that the prediction of this previous best forecaster determines the consensus across time, and that the degree to which his prediction is followed by his peers is determined by his forecasting performance. We inspect the micro-dynamics of these phenomena and identify the role of a new ecology of behavioral rules in which the role of the previous best forecaster as a leader of the market for expectations is crucial.

The sovereign credit rating is a key determinant of the cost and availability of international financing for an economy. This paper models ratings as a function of expected repayment capacity, derives testable hypotheses, and conducts a statistical analysis based of the ratings awarded by Institutional Investor. The key findings are as follows: 1) Expected rating revisions should be positive for moderately low rated countries and negative for moderately high rated countries. 2) Rating revisions are serially correlated with about one third of a country revision expected to carry-over from one semester to the next. This finding is confirmed with ratings awarded by Moody's and Standard and Poor's. 3) There are regional factors in revisions with about 17 percent of the revision to a regional portfolio expected to carry-over to each country in the region next semester. 4) The serial correlation of revisions is the highest in Emerging and Eastern European countries and the lowest among OPEC members. 5) The 1980s were surprisingly bad years for low- and middle-income country creditworthiness, while the early 1990s were surprisingly good. 6) The East Asian crisis of 1997-98 was much less significant in terms of its effect on global creditworthiness than the debt crisis of the early

Le CIRANO est une corporation privée à but non lucratif constituée en vertu de la Loi des compagnies du Québec. Le financement de son infrastructure et de ses activités de recherche provient des cotisations de ses organisations-membres, d’une subvention d’infrastructure du ministère de l’Industrie, du Commerce, de la Science et de la Technologie, de même que des subventions et mandats obtenus par ses équipes de recherche. La Série Scientifique est la réalisation d’une des missions que s’est données le CIRANO, soit de développer l’analyse scientifique des organisations et des comportements stratégiques. CIRANO is a private non-profit organization incorporated under the Québec Companies Act. Its infrastructure and research activities are funded through fees paid by member organizations, an infrastructure grant from the Ministère de l’Industrie, du Commerce, de la Science et de la Technologie, and grants and research mandates obtained by its research teams. The Scientific Series fulfils one of the missions of CIRANO: to develop the scientific analysis of organizations and strategic behaviour. Les organisations-partenaires / The Partner Organizations •Ministère de l’Industrie, du Commerce, de la Science et de la Technologie.

the project and provide a non-technical summary, a full report and a list of papers produced on the project. 1 Aims of the Project 1. To estimate disaggregate models of employment, prices and wages for the major industrial sectors of the UK, emphasising the role of expectations and the interactions that exist between these sectors in the determination of aggregate employment level and the overall rate of inflation. 2. To consider different expectations formation hypotheses in the context of these disaggregated models, noting the significance of the process of expectations formation in the transmission of output and inflation effects from one sector of the economy to another. 3. To investigate empirically competing hypotheses on the workings of the labour market using direct observations on expectations. Specifically, we will consider the role of expected output levels in employment equations, the role of inflation expecations and other variables, both internal and external to the industry, in wage equations, and the role of demand and cost expectations in the determination of the markup over the cycle in price equations, all estimated at the disaggregated level. 4. To investigate the potential in the UK for influencing the expectations formation process by