Journal of Political Economy· 2012Q1
What Can Survey Forecasts Tell Us about Information Rigidities?
- 863citations
- Q1SCImago
- 2012year
Short summary
Survey forecasts show that agents fail to fully adjust to shocks on impact, consistent with models of information rigidities.
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Key points
- Mean forecasts do not fully adjust to shocks on impact, contradicting full information assumptions.
- Forecast error dynamics after shocks are consistent with information rigidity models.
- Survey data can differentiate between competing models of information rigidities.
AI-generated from the title and abstract; the full text is not read.
Abstract
A lot. We derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers, firms, central bankers, and professional forecasters. We document that mean forecasts fail to completely adjust on impact to shocks, leading to statistically and economically significant deviations from the null of full information. The dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities. The conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities.
The authors' abstract, as published at the source. Journal of Political Economy, 2012 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance