What Can Survey Forecasts Tell Us About Informational Rigidities? / Olivier Coibion, Yuriy Gorodnichenko.

Format:

Book

Author/Creator:

Coibion, Olivier.

Contributor:

National Bureau of Economic Research.

Gorodnichenko, Yuriy.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14586.

NBER working paper series no. w14586

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

This paper uses three different surveys of economic forecasts to assess both the support for and the properties of informational rigidities faced by agents. Specifically, we track the impulse responses of mean forecast errors and disagreement among agents after exogenous structural shocks. Our key contribution is to document that in response to structural shocks, mean forecasts fail to completely adjust on impact, leading to statistically and economically significant deviations from the null of full information: the half life of forecast errors is roughly between 6 months and a year. Importantly, the dynamic process followed by forecast errors following structural shocks is consistent with the predictions of models of informational rigidities. We interpret this finding as providing support for the recent expansion of research into models of informational rigidities. In addition, we document several stylized facts about the conditional responses of forecast errors and disagreement among agents that can be used to differentiate between some of the models of informational rigidities recently proposed.

Notes:

Print version record

December 2008.