Journal Article Algorithms for Social Choice Functions Get access Donald E. Campbell Donald E. Campbell Ontario Economic Council and University of Toronto Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 3, April 1980, Pages 617–627, https://doi.org/10.2307/2297312 Published: 01 April 1980 Article history Received: 01 June 1977 Accepted: 01 April 1979 Published: 01 April 1980

This paper studies the relationship between real interest rates and housing using a microeconomic approach. The primary impact of interest rates is on the demand side. The partial equilibrium, comparative static model of demand behavior presented is based on intertemporal preference maximization subject to a multiperiod income constraint. The model is always in terms of real prices and interest rates and operates in discrete time. Consumer preferences are represente by a smooth utility function which depends on two kinds of goods, housing and other nondurables. This study is couched in a neoclassical framework with all markets assumed perfect unless otherwise specified. With this approach the theory of housing and interest rates becomes part of standard consumer theory, rather than being based on inappropriate present value considerations.

While inflation expectations have recently come to play a major role in both macroeconomic theorizing and stabilization-policy analysis, relatively little work has been done to date on testing models that purport to explain how forecasters form inflation anticipations. This paper attempts to begin to fill that lacuna by exploiting data on expected inflation recently published by John Carison (1977a). These data are briefly described in Section I. Section II examines the relationship between inflation expectations and a number of factors commonly believed to influence the actual rate of inflation, such as the money growth rate, a number of fiscalpolicy-related variables, and the unemployment rate. Also considered is the question of whether the expectations generating process has shifted over time. Section III examines the question of whether forecasters efficiently employ available information in generating inflation predictions. The final section summarizes the results and considers the policy-related implications.