INFLATION EXPECTATIONS DERIVED FROM BUSINESS TENDENCY SURVEY OF THE CENTRAL BANK

INFLATION EXPECTATIONS DERIVED FROM BUSINESS TENDENCY SURVEY OF THE CENTRAL BANK Ec Oral Saisics Dparmn Cnral Bank of Th Rpublic of Turky Ec.Oral@cmb.gov.r ABSTRACT Th xpcaions obaind from survys play an imporan rol as lading indicaors for h applicaion of h monary policis. Th xpcaions can b ihr qualiaiv or quaniaiv. Th qualiaiv inflaion xpcaions ar gahrd from h Businss Tndncy Survy ha is conducd by h Cnral Bank of h Rpublic of Turky. Diffrn mhods lik Carlson-Parkin mhod, Balanc mhod, Nonlinar rgrssion mhod ar usd o quanify h xpcaions. Th quanificaion mhods ar compard wih ach ohr. Th rliabiliy of h Businss Tndncy Survy of h Cnral Bank is also rviwd. Th Cronbach α cofficin is usd o find h rliabiliy and h survy is found o b highly rliabl. Bsids, h raionaliy of h inflaion xpcaions is sd and h formaions of h xpcaions ar xamind. Th formaion of inflaion xpcaions is invsigad and a propr modl canno b found. Kywords: Inflaion Expcaions, Quanificaion of Survy Daa, Rliabiliy, Raionaliy of Expcaions. JEL classificaion: C4

-Inroducion Th xpcaions obaind from survys plac an imporan rol as lading indicaors for h applicaion of h monary policis. Th Businss Tndncy Survy (BTS) of h Cnral Bank of h Rpublic of Turky has bn conducd monhly in ordr o g h opinions for h pas and fuur conomic condiions of h dircors, managrs of h firms ha guid h dcisions on conomy sinc Dcmbr 987. Th rspondns ar chosn on h basis of Isanbul Chambr of Indusry s ranking of h 00 biggs firms and Eg Chambr of Indusry s ranking of h 500 biggs firms. Th rspondns consis of h firms from h priva and public scors. Th scors compris mining, food, xils, wood, papr producs, chmicals, son, mals, machinry and nrgy. Th rspondn firms from h public scor ar 7 prcn of h oal rspondns. Th numbr of rspondns hav bn 94 sinc Novmbr 00. Th survy consiss of qusions abou h gnral cours of businss in h indusry, invsmns, sals, produciv capaciy, capaciy uilizaion, socks, inflaion ras and Turkish lira crdi inrs ras. BTS consiss of 34 qusions, 5 of which ar dald wih h ndncy of pas and fuur conomic condiions, 5 wih h ordring of svral facors and 4 wih inflaion ra and Turkish lira crdi ras. Th qusion on xpcd inflaion (wholsal prics) ovr h nx hr monhs has bn addd o h qusionnair in May 997 and h ohr qusions abou xpcd inflaion and Turkish lira crdi inrs ras hav bn addd in January 999 and May 000, rspcivly. Th opinions of h firms can show h posiiv and ngaiv ffcs of h conomic policis and ac as a guid for h drminaion of wha should b don o improv h conomy. Lik h ohr ndncy survys, BTS hlps o s h conomic aciviy prformanc of h manufacuring indusry. Thr ar diffrn mhods o quanify h qualiaiv survy rsuls. Th main aim of his papr is o quanify h inflaion xpcaions of h priva scor and o xamin h formaion of xpcaions. Th sudy is composd of fiv scions. Th aims of h sudy and h daild knowldg abou BTS ar prsnd in h inroducion par. Th rs of h rliabiliy of h BTS (Özcan, 99) ar givn in h scond scion. Th hird scion givs h xplanaion of h quanificaion mhods. Th quanifid inflaion xpcaions ar givn in h fourh scion. Th formaion of inflaion xpcaions is xamind in h fifh scion. Finally, h conclusion par givs h final rsuls.

- Th Rliabiliy of Businss Tndncy Survy (BTS) I is dsird ha h s scors of survys should b consisn. If h s (qusionnair) scors diffr whn h survys ar rpad undr h sam condiions, h rliabiliy of h s will b low (Özgüvn, 998). Th rliabiliy analysis is prformd in ordr o find h dgr of associaion bwn qusions of a s whn on prson s knowldg and aiud o an vn is found by adding his s scors. Each qusion of a s should b usful o xplain an vn. This can happn whn qusions ar highly corrlad wih ach ohr. Th rliabiliy masurs can b found by using h corrlaions and covariancs. Th masurs of rliabiliy ar: Spli Half: Th qusions in h s ar dividd ino wo pars and h corrlaion bwn hs wo pars ar found. Guman Cofficin: Thr ar six cofficins o b found. Ths cofficins ak valus lss han or qual o h ral rliabiliy cofficin. Th rliabiliy of h s is found by using covariancs or variancs. Paralll: Th qualiy of h variancs of h qusions is assumd and h rliabiliy cofficin of Th Biggs Similariy is simad. Th Chi-Squar s is usd o analys h simas o b significan or no. Cronbach α Cofficin: Th cofficin is h wighd man of sandard dviaion ha can b found by aking h raio of sum of h variancs of qusions o h ovrall varianc. Th cofficin aks valus bwn zro and on. If h qusions ar sandardizd, h cofficin will b basd on h man of h corrlaions or covariancs of h qusions (Özdamar, 997). Th α cofficin is givn blow (Özcan, 99; Özgüvn, 998): n i n σ i= R =α= n σ whr R= Rliabiliy cofficin, α = Cronbach α Cofficin, n = Th oal numbr of qusions σ i = Varianc of h i h qusion, σ = Ovrall Varianc 3

Th inrvals of h α cofficin and h dgr of rliabiliy can b givn as follows: 0.00 α 0.40 shows ha s is no rliabl. 0.40 α 0.60 shows ha s is lss rliabl. 0.60 α 0.80 shows ha s is qui rliabl. 0.80 α shows ha s is highly rliabl (Özdamar,997). Th rliabiliy of BTS is sd on h daa of 53 firms of h priva scor in Fbruary 00. Th firs 3 qusions ar usd for h rliabiliy analysis. Th answrs of h qusions hav h formaion as qualiaiv and ordinal choics so Likr scal is usd (Özcan, 99; Mosr & Kalon, 97). Th scaling is don by giving h biggs scor o h mos opimisic answr and h smalls o h mos pssimisic answr. Cronbach α cofficin is usd for h rliabiliy cofficin. Th cronbach α cofficin is found as 0.856 ha shows BTS o b highly rliabl. Im(qusion)-Toal corrlaions ar invsigad and i is obsrvd ha h qusions 5, 7, 8,, 8, 0,, and 3 hav low corrlaions changing bwn -0.0847 and 0.06. According o his rsul, i can b said ha hs qusions ar irrlvan and should b dld. Thr is nd o xamin h rliabiliy cofficin whn im is dld. If h rliabiliy cofficin dcrass, h im is imporan for h s; ohrwis h im should b dld. Whn all h analyss ar don, i is sn ha h qusions ha ar found o hav low corrlaions ar irrlvan for h survy. Whn hs qusions ar dld, h rliabiliy cofficin incrass by h inrval 0.0004-0.05. Th incrmn is oo lil so hr is no nd o dl hs qusions. Th qusions addd o h survy lar (9 h and 3 nd qusions) ar addd o h analysis o s h chang afrwards in h rliabiliy cofficin of h survy. Th Cronbach α cofficin is usd again o find h cofficin of rliabiliy of BTS. Im-Toal corrlaions ar invsigad and similar rsuls ar obaind. Cronbach α cofficin is found as 0.866 which shows BTS o b highly rliabl whn nw qusions ar addd. 3-Quanificaion of h Qualiaiv Expcaions From Survys Inflaion xpcaions hav an imporan rol in modrn macroconomic hory. Th imporanc of xpcaions has bn mphasizd by h rcn inflaion xprincs of mos counris. Dirc masurmn of xpcaions can b mad hrough h ndncy survy daa. Th quaniaiv xpcaions daa ar gahrd in som survys. Howvr, h rspondns indica whhr prics will fall, ris or rmain unchangd for som monhs ahad in h ohr survys. Th daa gahrd from hs survys do no hav a man valu bcaus hy ar qualiaiv. Thr ar svral chniqus o quanify h qualiaiv survy daa (Bachlor, 4

98). Th calculaion of quaniaiv inflaion xpcaions from h sampl proporions of hr-cagory rsponss (prics will fall, ris or rmain unchangd) is basd on h following assumpions: h proporion of posiiv pric changs will b approximaly qual o h proporion of ris answrs of firms. h proporion of no pric changs will b approximaly qual o h proporion of no chang answrs of firms. h proporion of ngaiv pric changs will b approximaly qual o h proporion of fall answrs of firms. L h proporion of answrs ar givn as: A =Proporion of ris answrs of firms B =Proporion of no chang answrs of firms C =Proporion of fall answrs of firms such ha A +B +C =. L X b h coninuous random variabl ha shows h xpcd ra of pric changs. Thr should b a no pric chang inrval which is calld indiffrnc inrval. This inrval lis bwn small ngaiv and posiiv valus (Uygur, 989). Siz (988) has his inrval as nonsymmric and dfind δ m (lowr limi) and δ p (uppr limi). Carlson and Parkin (975) hav his inrval as symmric and dfind as δ m =δ p =δ, so h rang of no chang will b -δ and δ. I is hough ha δ dnos h prcnag ha corrsponds o a jus prcpibl xpcd pric ris, -δ a jus prcpibl xpcd pric fall and h inrval (-δ,δ) no chang in prics. L X is sandardizd and Y b h ransformd variabl. Thn, A C = = δ() δ() f (x)dx = f (x)dx = z () z () f (y)dy f (y)dy L h xpcd valu and h varianc of h random variabl X givn as E(X)=µ and σ, rspcivly. Ths paramrs can b simad as shown blow: X E(X) δ() E(X) C = p(x < δ()) = p < = p(y < z()) σ σ 5

X E(X) δ() E(X) A = p(x < δ()) = p < = p(y < z ()) σ σ Th quaions abov ar usd and h following quaions ar found: δ() E(X) δ() E(X) z () =, z () = σ σ Thn h quaions ()σ = δ() E(X), ()σ = δ() E(X) ar solvd and xpcd z valu and varianc can b found as: z (E(X)) [ z() + z ()] [ z () z ()] = δ(), σ δ() = () [ z () z() ] I is imporan o dcid on h disribuion of X and h valu of h indiffrnc inrval. Th mosly usd disribuions for X ar uniform, normal and logisic disribuion. If X is normally disribud, hn Y will b disribud as sandard normal and z (), z () will b found by using h invrs cumulaiv disribuion funcion of h sandard normal disribuion (Uygur,989). Assum ha X is disribud uniformly wih paramrs u and v. Thn, z () and z () ar found as: z() = C and z () = A. Th xpcd valu and h varianc can b found as: [ C A ] [ A C ] δ() (E(X)) = δ(), σ = [ A C ] L X has h logisic disribuion wih paramrs θ and η. Thn, w g 3 z() ln C = and π b found as: 3 z () ln A =. Th xpcd valu and h varianc can π (E(X)) ln((/ C ) ) + ln((/ A ) ) = δ() ln((/ A ) ) + ln((/ C ) ), σ δ() = ln((/ A ) ) + ln((/ C ) ) π * 3 Carlson and Parkin (975), Bachlor (98, 986) and Psaran (985), propos a valu for δ() by using h assumpion ha ovr h whol sampl priod h avrags of xpcaions 6

and pric chang ralizaions ar qual (unbiasdnss). Th simad valu of δ is givn blow: = δˆ = T () z z T p () + z () z = () () P P whr p = * 00 and P is h rail pric indx rpord for monh. P Dans (973) has p as h on quarr prcnag changs in pric dflaor for non-farm gross naional produc. Knöbl (974) sas o hav an arbirary valu for δ. Pkr and Tuuş (999) us h sandard dviaion of of acual inflaion ra in h priva manufacuring scor for h valu of δ. Psaran (987) proposs addiional modls for h valu of δ whn hr ar daa on h prsn pric movmns. Th quanificaion of h prsn pric movmns of h firms is found similar o h fuur xpcaions. Thn z (), () ar dfind as () z, z (), p and w g z, p for h prsn prics z () + z () p = δ() (3) z () z () Th ordinary las squars ar applid o quaion in (3) and h simad valu of δ is obaind. Thn, his valu is usd in quaion in () o find h xpcaions. L d z () + z () =, hn δ can b simad as h raio of h avrag of p o h avrag z () z () of d. Uygur (989) proposs a nonlinar modl o find h xpcaions wihou using δ(): α *(z () / B + ) β(z ()*(A A )) p = ; z () = [ z () + z ()]/ (4) θ *z () whr A is h proporion of ris answrs of firms for prsn prics and B is h proporion of no chang answrs of firms for prsn prics. θ, β and α ar h paramrs ha hav o b simad. Thn, h xpcd inflaion can b found as: α *(z() / B ) + β(z()*(a A )) ( E(X)) = θ *z() ; z() [ z () + z ()]/ = (5) 7

Th final mhod is calld Balanc mhod. Th rsuls from qualiaiv survys wih hrcagory variabls ar quod as balancs (diffrncs bwn proporions of posiiv and ngaiv rsponss). I is qual o A C in his sudy. Thn h inflaion xpcaions ar qual o E(X)) = k(a C ), whr k is a scaling facor, drmind by applying ( unbiasdnss assumpion and qual o 4-Quanifid Expcaions = T = kˆ = T (Fluri and Sporndli, 987). (A C ) Th xpcd inflaion qusion of BTS is h xpcaion for inflaion ra (wholsal prics) ovr h nx hr monhs. This qusion is invsigad o find h inflaion xpcaions of h priva firms. Th mhods dscribd abov ar usd o find h indiffrnc inrval for h daa. 4.- Th Expcaions by Using Sandard Dviaion of Ralizaions Th priod of h BTS daa is bwn May 997 and Fbruary 00. Th daa ar monhly, bu h inflaion xpcaions ovr nx hr monhs ar askd so h WPI (wholsal pric indx basd on 994=00) ar akn monhly. L h firms ar askd for hir nx hr monh inflaion xpcaions in Fbruary. Th Sa Insiu of Saisics (SIS) publishs h WPI for January in Fbruary, so h firms only hav knowldg of WPI for January. Th nx hr monhs can b hough o b Fbruary, March and April. Thrfor, i is assumd ha h firms can guss wha h avrag of h WPI for h nx hr monhs will b. Thn h prcnag chang of his avrag valu from h WPI for January is assumd o b hir nx hr monhs inflaion xpcaions. Thr is nd of forming ralizaions in ordr o compar hm wih xpcaions, so h ralizaions ar found by using h procdur abov. Th sandard dviaions of h ralizaions ar found and usd as h sima of δ. Th xpcaions according o hr disribuions (normal, uniform and logisic) ar found for inflaion ra (whol sal prics) and givn in Figur. p 8

Figur 60 50 40 30 0 0 0-0 Ma.97 Jul.97 Sp.97 Nov.97 Jan.98 Marc.98 Ma.98 Jul.98 Sp.98 Nov.98 Jan.99 Marc.99 Ma.99 Jul.99 Sp.99 Nov.99 Jan.00 Marc.00 Ma.00 Jul.00 Sp.00 Nov.00 Jan.0 Marc.0 Ma.0 Jul.0 Sp.0 Nov.0 Jan.0 uniform normal logisic % wpi Figur shows ha h xpcaions obaind by using normal disribuion ar vry clos o h ralizaions compard wih h xpcaions according o h ohr wo disribuions. 4.- Th Expcaions Obaind by Nonlinar Rgrssion BTS conains only inflaion xpcaions so z(), B and A ar usd insad of z (), B and in quaion (4). A Th xpcaions obaind by using logisic disribuion: ( E(X)) = 7.496+ 0.993*(z() / B ) 0.934*(z() *(A A )) (0.03) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.66, R :0.64, Durbin-Wason sa.:0.96, Whi prob.:0.004, LM Ts ( lags) prob.: 0.003. ARCH LM Ts ( lag) prob.: 0.053, Jarqu-Bra prob.: 0.000. Th xpcaions obaind by using normal disribuion: ( E(X)) = 7.4+ 0.957*(z() / B ) 9.004*(z() *(A A )) (0.058) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.66, R :0.65, Durbin-Wason sa.:0.94, Whi prob.:0.005, LM Ts ( lags) prob.: 0.00. ARCH LM Ts ( lag) prob.: 0.039, Jarqu-Bra prob.: 0.000. c) Th xpcaions obaind by using uniform disribuion: ( E(X)) = 7.386+ 0.8364*(z() / B ) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.67, R :0.66, Durbin-Wason sa.:0.97, Whi prob.:0.3, LM Ts ( lags) prob.: 0.007. ARCH LM Ts (6 lags) prob.: 0.083, Jarqu-Bra prob.: 0.08. Th xpcaions ar givn in Figur. 9

Figur 60 50 40 30 0 0 0-0 Jun.97 Aug.97 Oc.97 Dc.97 Fb.98 Apr.98 Jun.98 Aug.98 Oc.98 Dc.98 Fb.99 Apr.99 Jun.99 Aug.99 Oc.99 Dc.99 Fb.00 Apr.00 Jun.00 Aug.00 Oc.00 Dc.00 Fb.0 Apr.0 Jun.0 Aug.0 Oc.0 Dc.0 Fb.0 uniform normal logisic % w pi Figur shows ha h xpcaions obaind by using hr disribuions (uniform, normal and logisic) ar all vry clos o h ralizaions. 4.3- Th Expcaions by Using Carlson-Parkin Mhod Th simad valus of δ ar found as.95, 8.63 and 0. whn h uniform, normal and logisic disribuion ar usd o quanify h qualiaiv rsponss rspcivly. Th xpcaions ar givn in Figur 3. Figur 3 90 70 50 30 0 90 70 50 30 0-0 -30-50 Ma.97 Jul.97 Sp.97 Nov.97 Jan.98 Marc.98 Ma.98 Jul.98 Sp.98 Nov.98 Jan.99 Marc.99 Ma.99 Jul.99 Sp.99 Nov.99 Jan.00 Marc.00 Ma.00 Jul.00 Sp.00 Nov.00 Jan.0 Marc.0 Ma.0 Jul.0 Sp.0 Nov.0 Jan.0 uniform normal logisic % wpi Figur 3 shows ha h xpcaions obaind by using hr disribuions (uniform, normal and logisic) ar all diffrn from h ralizaions. 0

4.4- Th Expcaions by using Balanc mhod Th simad valu of h scaling facor k is found as 6.8. Th xpcaions ar givn in Figur 4. Figur 4 60 50 40 30 0 0 0-0 -0-30 -40 Ma.97 Jul.97 Sp.97 Nov.97 Jan.98 Marc.98 Ma.98 Jul.98 Sp.98 Nov.98 Jan.99 Marc.99 Ma.99 Jul.99 Sp.99 Nov.99 Jan.00 Marc.00 Ma.00 Jul.00 Sp.00 Nov.00 Jan.0 Marc.0 Ma.0 Jul.0 Sp.0 Nov.0 Jan.0 xpcaions % w pi Figur 4 shows ha h xpcaions and ralizaions ar vry diffrn from ach ohr. Th xpcaions obaind by nonlinar rgrssion mhod hav h bs fi and h xpcaions by using balanc mhod hav h wors fi o h ralizaions for BTS. I is known ha Carlson-Parkin and Balanc Mhods hav disadvanags compard wih all h ohr mhods bcaus hy nd unbiasdnss assumpion (Dans, 973). Four saisical criria ar usd o s h diffrncs bwn hs mhods clarly. Th rsuls ar givn in Tabl blow. Th minimum of h man absolu rror, man squar rror, Thil s inqualiy cofficin and h maximum drminaion cofficin ar usd o find h bs fi of xpcaions o h ralizaions. Th nonlinar rgrssion mhod has h las man squar rror and h highs drminaion cofficin. Th man squar rrors of Carlson-Parkin and Balanc Mhods ar vry high for BTS.

Tabl Sandard Dviaion Nonlinar Rgrssion Carlson Parkin Mhod Balanc unif. nor. logis. unif. nor. logis. unif. nor. logis. MAE 6.873 6.637 6.768.704.683.696 3.33 5.789 6.43 6.447 MSE 65.77 5.94 54.080 5.00 5.05 5.305 57.55 435.389 44.943 395.386 TU 0.875 0.785 0.793 0.4 0.46 0.49.478.5.7.45 R-Squar 0.67 0.65 0.65 0.669 0.66 0.656 0.67 0.65 0.65 0.5 n MAE = P P / n (man absolu rror of prdicion), MSE = (P P ) / n (man squar rror of prdicion), i= n TU = (P i= n P ) (P ) i= / n i= (Thil s inqualiy cofficin), R = Drminaion cofficin. 5-Th Formaion of Inflaion Expcaions Th xpcaions of conomic agns has bn an imporan issu in macroconomics for many yars. Sinc h way in which xpcaions ar formd has imporan implicaions for conomic bhavior, many conomiss hav usd survy daa o s hypohss abou xpcaion formaion (Kan & Runkl, 990). Thr ar hr approachs of xpcaions: Exrapolaiv, Adapiv and Raional. Th raional xpcaions is basd on h assumpion ha individuals, a las on avrag, opimally us all availabl rlvan informaion whn making hir forcass of fuur dvlopmns of conomic variabls. L P dno h acual inflaion ra of priod, P h ra xpcd for a h survy da (nd of priod -) and I rprsn h informaion s a -. Thn, h following qualiy holds: This qualiy implis ha P = E(P / I ) [ P E(P / I )] 0 E = maning ha forcas rrors may no b corrlad wih any variabl of h informaion s (ohrwis h forcas would viola h assumpions of h raional xpcaions hypohss). Forcas rrors mus b srially uncorrlad. Th ss of h raional xpcaions ar: Tss of unbiasdnss and for absnc of srial corrlaion of forcas rrors Ts of fficincy Ts of orhogonaliy

A s of unbiasdnss can b prformd by making us of h following quaion P = α + βp + ε (6) Th unbiasdnss can b sd by h null hypohsis H 0 = α = 0,β =. Th prdicions ar ndd o b uncorrlad wih all variabls in I. Th currn forcas rror is rgrssd on a subs of I, namly on an numbr of pas ralizaions of h forcas variabl. Thr should b no significan rlaionship bwn P (i>0) and forcas rror. If i i is found o hav no rlaionship, hn i can b said ha h prdicions ar fficin (Fluri & Sporndli, 987). Th orhogonaliy can b sd by using h following quaion: P = α + βp + γx + ε (7) whr X is any variabl in h informaion s a im -. Th null hypohsis o s orhogonaliy will b qual o H 0 = α = 0,β =, γ = 0. X can b ralizaions or xpcaions of pas priod, growh ra of mony supply, pric of oil, capaciy uilizaion ra (Kan & Runkl, 990). Exrapolaiv Expcaions Hypohsis can b givn as: P = b0 *P + b *P +... (8) This hypohsis assums ha h inflaion xpcaions dpnd on h acual ra of inflaion in h pas. A modificaion of h hypohsis in quaion (8) would b: P = b0 *P + b *(P P ) whr b shows h xpcaions abou h rnd. If b is found o b grar han zro, i is xpcd ha h rnd of h acual ra of inflaion coninus. If i is lss han zro, a chang in h rnd is xpcd. Adapiv Expcaions Hypohsis can b givn as: P P = b*(p P ), 0<b< (9) If h xpcd and h acual ra of inflaion ar qual in h prcding priod, i is assumd ha no adjusmn of pric xpcaions is mad. If h xpcd ra of inflaion diffrs from h acual ra, hn pric xpcaions for h nx priod ar corrcd accordingly (Knöbl, 974). Th quaion in (9) is calld firs ordr adapiv xpcaions hypohsis. n P = bi *(P i P i ) i= P is h n h ordr adapiv xpcaions hypohsis. 3

Psaran (985) considrs four addiional modls givn as: (a) P P = b *(P P ) + b *(P P ) + b *(P P ) 0 (b) P = b *(P P ) P 0 (c) P P = b *(P P ) + b *(P P ) 0 (d) P = b0 + b *P + b * P + b3 *P + b 4 * P Th quaion in (a) is calld adapiv-rgrssiv schm. I is a gnralizaion of h firs ordr adapiv modl. Th quaion in (b) rprsns a simpl acclraion hypohsis and mbodis h ida ha inflaion xpcaions ar changd only if a chang in h acual ra of inflaion is obsrvd. Th quaion in (c) is h mixd-adapiv-acclraion hypohsis. Th quaion in (d) rprsns h union-inrscion of modls (a), (b), (c) and also firs and scond ordr adapiv xpcaions hypohsis. According o h Tabl abov, i can b said ha h xpcaions found by using h nonlinar rgrssion mhod and having uniform disribuion for pric changs givs h bs rsul, so h daa from his approach ar xamind. Th sasonaliy for all sris is inspcd bfor sing h formaion of xpcaions by using h program calld Dmra. 5. Th Formaion of Expcaions of BTS Th xpcaions of BTS ar xamind o s h formaion of h xpcaions. Firs of all, h raional hypohsis is sd and h rsuls ar givn blow: Th unbiasdnss s is prformd and h quaion (6) is found as (0.3) P =.6354+ 0.8065* P Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.67, R :0.66, Durbin-Wason sa.:0.96, Whi prob.:0.000, LM Ts ( lags) prob.: 0.009. ARCH LM Ts (4 lags) prob.: 0.0, Jarqu-Bra prob.: 0.89. Th Wald s is usd o s h null hypohsis H 0 = α = 0,β = and boh F-saisic and Chi-squar ar found o hav probabiliy qual o 0.35. I shows ha h xpcaions ar unbiasd, so h corrlaions of forcas rrors ar invsigad. Th Srial Corrlaion LM s is usd wih wlv lags and h probabiliy is found as 0.009. This saisic shows ha hr is srial corrlaion up o wlv lags. Thn, h fficincy and orhogonaliy ar sd. Th currn forcas rror is rgrssd on pas ralizaions of h forcas variabl. Thr should b no significan rlaionship bwn P (i>0) and forcas rror. I is found ha igh lags of pric changs and forcas rrors hav no rlaionship in h following quaion: i 4

Rs = 0.05* P + 0.* P + 0.6* P 0.5* P + 0.4* P 0.0* P + 0.0* P 0.3* P 3 4 5 6 7 (0.88) (0.84) (0.7) (0.58) (0.80) (0.88) (0.66) (0.07) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. Rs is h rsidual rm. R :0.3, R :0., Durbin-Wason sa.:.37, Whi prob.:0.7, LM Ts ( lag) prob.: 0.044. ARCH LM Ts ( lag) prob.: 0.03, Jarqu-Bra prob.: 0.005. Th prdicions ar found o b fficin. Th orhogonaliy is sd by using h quaion (7). Th changs of h pas prics and monhly changs in h dollar xchang ras ar usd for X and h quaions ar givn as: 8 P =.74 4 + 0.6894* P (0.089) + 0.87* usd Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.7, R :0.7, Durbin-Wason sa.:0.83, Whi prob.:0.688, LM Ts ( lags) prob.: 0.000. ARCH LM Ts ( lag) prob.: 0.097, Jarqu-Bra prob.: 0.43. P = 0.399+ 0.4464* P + 0.589* P, (0.476) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R:0.88, R :0.87, Durbin-Wason sa.:.8, Whi prob.:0.49, LM Ts ( lags) prob.: 0.004. ARCH LM Ts ( lag) prob.: 0.655, Jarqu-Bra prob.: 0.000. Th null hypohsis H 0 = α = 0,β =, γ = 0 is sd and h probabiliy of F-saisic is found o b 0.000 for boh modls. Th rsuls show ha h xpcaions ar no raional bcaus only h unbiasdnss and fficincy condiions ar saisfid. Thrfor, h adapiv and xrapolaiv xpcaion formaions ar sd. Th quaion (8) is applid: P =.0776* P (0.0006).8077 P + (0.0) (0.003) 0.6864* P Th Whi Hroscdasiciy-Consisn sandard rrors ar usd and h probabiliis ar givn in h parnhss. R :0.47, R :0.45, Durbin-Wason sa.:.59, Whi prob.:0.00, LM Ts ( lag) prob.: 0.33. ARCH LM Ts ( lag) prob.: 0.683, Jarqu-Bra prob.: 0.000. Th drminaion cofficin is low. Th pas ralizaions up o lag 3 hav significan ffc on xpcaions. Th modifid xrapolaiv xpcaions ar sd: P = 0.95* P + 0.7*(P P ) (0.05) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.39, R :0.37, Durbin-Wason sa.:.38, Whi prob.:0.00, LM Ts ( lag) prob.: 0.06. ARCH LM Ts ( lag) prob.: 0.477, Jarqu-Bra prob.: 0.000. Th drminaion cofficin is vry low. 3 5

Th adapiv xpcaions ar formd: P P = 0.5449*(P (0.76) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.3, R :0.3, Durbin-Wason sa.:.64, Whi Prob.:0.066, LM Ts ( lag) prob.: 0.034. ARCH LM Ts ( lag) prob.: 0.56, Jarqu-Bra prob.: 0.000. Th drminaion cofficin is qui low. Th cofficin is found o b insignifican. Th modl shows ha h xpcaions ar no adapiv. Th quaions (a)-(d) ar also xamind: P (a) P P = 0.77*(P P ) +.37*(P P ) 0.60(P P ) (0.905) (0.77) ) (0.83) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.5, R :0., Durbin-Wason sa.:.74, Whi Prob.:0.000, LM Ts (4 lags) prob.: 0.045. ARCH LM Ts (3 lags) prob.: 0.076, Jarqu-Bra prob.: 0.000. (b) P = 0.48*(P P ) P (0.307) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R:0.05, R :0.05, Durbin-Wason sa.:.36, Whi Prob.:0.000, LM Ts ( lags) prob.: 0.07. ARCH LM Ts (7 lags) prob.: 0.077, Jarqu-Bra prob.: 0.000. (c) P P = 0.657*(P P ) + 0.679*(P P ) (0.73) (0.3) Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.5, R :0.3, Durbin-Wason sa.:.75, Whi Prob.:0.000, LM Ts (4 lags) prob.: 0.036. ARCH LM Ts (3 lags) prob.: 0.07, Jarqu-Bra prob.: 0.000. (d) P = 4.78+ 0.044* P + 0.0078* P +.3907* P 0.9377* P (0.9) (0.944) (0.3) (0.36) Th Whi Hroscdasiciy-Consisn sandard rrors ar usd and h probabiliis ar givn in h parnhss. R :0.58, R :0.55, Durbin-Wason sa.:.8, Whi Prob.:0.000, LM Ts ( lag) prob.: 0.0. ARCH LM Ts ( lag) prob.: 0.979, Jarqu-Bra prob.: 0.000. Th drminaion cofficins for h modls a o d ar qui low. All h modls hav insignifican cofficins. A suiabl modl for h xpcaions canno b found, so h variabls ha can affc h formaion of inflaion xpcaions ar considrd and a modl is consrucd. Th monhly changs in mony supplis (currncy in circulaion, M, M, sigh dposis, im dposis, MX, forign xchang dposi accouns), xchang ras (Grman mark and US dollar) and wighd man of h compound inrs ras of Trasury aucions ar akn o find a modl for h formaion of inflaion xpcaions. All h variabls ar I(0) according o h ADF and Philips Prron uni roo ss. 6

Th modl is givn blow: P = 3.9058+ 0.36* P + 0.354* usd + (0.009) 0.065* i Th valus in h parnhss show h probabiliis of h simad valus according o Nwy-Ws HAC sandard rrors. R :0.8, R :0.80, Durbin-Wason sa.:.43, Whi prob.:0.000, LM (4 lags) prob.:0.006. ARCH LM Ts (4 lags) prob.: 0.67, Jarqu-Bra prob.: 0.044. Sampl Priod: 997:06-00:0. Th drminaion cofficin is qui high and givn as 8 prcn. According o his modl, h ralizaions of pric changs, h changs in h dollar xchang ras and h changs in h wighd man of h compound inrs ras a lag hav significan ffc on xpcaions. 6-Conclusion This papr has ampd o analys h qualiaiv inflaion xpcaions gahrd from h survy daa. Th rliabiliy analysis of h BTS survy daa is xamind. Th Cronbach α cofficin is usd o find h rliabiliy and i is found o b highly rliabl. Th survy rsuls ar xamind and h qualiaiv inflaion xpcaions ar quanifid by using diffrn mhods. Th mhods ar compard by using saisical criria (man squar rror, man absolu rror, drminaion cofficin and Thil s inqualiy cofficin). Th uniform disribuion for h pric changs in h nonlinar rgrssion mhod givs h bs rsul. Th wors mhod for BTS is found o b h Balanc Mhod. Th formaion of h xpcaions is xamind. Th raional hypohsis is sd for h survy and i is found ha h inflaion xpcaions drivd from BTS ar no raional. Adapiv xpcaions hypohsis is also xamind and h xpcaions drivd from BTS ar no adapiv. Bsids, h xpcaions ar no xrapolaiv. Th four addiional modls of Psaran (985) ar consrucd bu no saisfacory rsul is found. Finally, h formaion of inflaion xpcaions of BTS is invsigad by consrucing a modl. According o h modl, h ralizaion of pric changs, h changs in h dollar xchang ras and h changs in h wighd man of h compound inrs ras of h prvious monh hav significan ffc on h xpcaions drivd from BTS. 7

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