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An analysis of predictions of six interest rates over 3-months-ahead and 6-months-aheadhorizons, surveyed regularly over eight years, casts doubt on the hypothesis that market participants' expectations are 'rational' in Muth's sense. Tests show that the survey respondents did not make unbiased predictions, that (especially for the 6-months-ahead predictions) they did not efficiently exploit the information contained in past interest rate movements, that their respective 3-months-ahead and 6-months-ahead predictions failed to be consistent in the sense required for 'rationality', and that (for long-term but not short-term interest rates) their predictions failed to exploit efficiently the information contained in common macroeconomic and macro-policy variables other than the money stock.

Interest rates.

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Asset prices set in a competitive market need not be martingales; that is, it need not be true that the best predictor of future prices is the current price. Nonetheless, statistical tests for this property are sometimes treated as tests for the proper functioning of an asset market; asset prices often seem to have the property to a close approximation, and it is sometimes supposed that the martingale ought to be imposed on econometric models of asset markets and forecasts made from them. This paper shows that under general conditions, which allow among other things for risk aversion among market participants, competitive asset prices ought to be locally -- over small units of time -- martingale-like. This implies that tests of proper functioning of the market ought to be conducted with data at fine time intervals; results of such tests should not be used to justify imposing the martingale property on a model's long-term projections of asset prices.

Interest rates --- Prices --- Mathematical models.

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In his final address to the Board of Directors, President Robert S. McNamara discusses the future role of the Bank during a time in which surging oil prices threaten critical development tasks. He examines four themes: the prospects for economic growth and social advance in oil-importing developing countries; a program of structural adjustment that developing countries, industrialized nations, and OPEC countries can take to maximize growth; the need to accelerate the attack on absolute poverty; and the role the World Bank ought to play in the decade ahead.

Access to Education --- Capital Flows --- Capital Markets --- Capital Requirements --- Child Mortality --- Commercial Banks --- Consumers --- Creditworthiness --- Developing Countries --- Economic Adjustment and Lending --- Economic Growth --- Employment --- Employment Opportunities --- Exchange Rates --- Exporters --- Fertility --- Financial Institutions --- Food Production --- Health, Nutrition and Population --- Industrialization --- Infant Mortality --- Inflation --- Interest Rates --- International Financial Institutions --- Job Creation --- Legislation --- Life Expectancy --- Low-Income Countries --- Macroeconomics and Economic Growth --- Measles --- Migration --- Nutrition --- Official Development Assistance --- Penalties --- Population & Development --- Poverty Reduction --- Primary Education --- Productivity --- Public Investment --- Recession --- Regulatory Agencies --- Remittances --- Respect --- Rural Development --- Sanitation --- Savings --- Savings Rate --- Social Development --- Technical Assistance --- Unemployment --- Universal Primary Education --- Urban Areas --- Wages