Information, Business Survey Forecasts and Measurement of Output Trends in Six European Economies.

Direct measures of expectations, derived from survey data, are used in a Vector Autoregressive (VAR) model of actual and expected manufacturing output series in six European Economies over the period 1968-1998.No evidence is found with which to reject rationality in the derived expectations series when measurement error is appropriately taken into account. The VAR analysis is used to derive measures of trend output and these measures are compared with the trend obtained using only actual data. The relative merits of the derived series are described with reference to the efficiency and parsimony of their use of information.