3. Are people’s inflation forecasts rational? To investigate this question, go to the IMF website and find the Fund’s annual reviews on Indonesia (https://www.

imf.org/en/countries/idn?selectedfilters=Article%20 IV%20Staff%20Reports#whatsnew) and find the Selected Economic Indicators table in each edition.

Make a plot showing the forecast of consumer price index (CPI) for each year. Compare the IMF forecast with the actual CPI growth from the FRED database.

If forecasts are rational, what pattern should you see in the data? What pattern do you observe in your plot? Does the evidence support the idea that expert’s inflation forecasts are rational?