Learning to Forecast the Hard Way-Evidence from German Reunification / Thomas P. Triebs, Justin Tumlinson.

Format:

Book

Author/Creator:

Triebs, Thomas P.

Contributor:

National Bureau of Economic Research.

Tumlinson, Justin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19209.

NBER working paper series no. w19209

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

Do firms learn to forecast future business conditions after structural changes to the economy? How long does it take? We exploit German Reunification as a natural experiment, where Eastern are treated with ignorance about the distribution of market states, to test Bayesian learning. As predicted, Eastern firms initially forecast future business conditions worse than Western ones, but this gap gradually closes over a decade following Reunification. The slow convergence stems from differences in forward expectations rather than realized market conditions. These results warn of costly and drawn out adjustments to regime changes, as the trade wars, COVID19 and Brexit.

Notes:

Print version record

July 2013.