Differential Interpretation Of Information In Inflation Forecasts

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Differential Interpretation Of Information In Inflation Forecasts

Author Info

Eugene Kandel
Ben-Zion Zilberfarb

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Eugene Kandel

Abstract

We test the hypothesis associated with a standard assumption in the theoretical literature on learning: that economic agents interpret information identically. We use a data set based on a survey of Israeli business executives forecasting future inflation. One of the main advantages of using this data is that a major change in the inflation regime in 1985 can be treated as a natural experiment in new beliefs formation. We develop a methodology for testing this hypothesis and find evidence that is inconsistent with the identical-interpretation hypothesis, but is consistent with the proposed alternative. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 81 (1999)
Issue (Month): 2 (May)
Pages: 217-226
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Handle: RePEc:tpr:restat:v:81:y:1999:i:2:p:217-226

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Clements, Michael P., 2008. "Explanations of the inconsistencies in survey respondents'forecasts," The Warwick Economics Research Paper Series (TWERPS) 870, University of Warwick, Department of Economics. [Downloadable!]
Bernhard Winkler, 2000. "Which kind of transparency? On the need for clarity in monetary policy-making," Working Paper Series 26, European Central Bank. [Downloadable!]
Marco Ottaviani & Peter Norman Sorensen, 2001. "The Strategy of Professional Forecasting," Discussion Papers 01-09, University of Copenhagen. Department of Economics. [Downloadable!]
Other versions:
- Marco Ottaviani & Peter Norman Sørensen, 2004. "The Strategy of Professional Forecasting," FRU Working Papers 2004/05, University of Copenhagen. Department of Economics. Finance Research Unit. [Downloadable!]
- Ottaviani, Marco & Sorensen, Peter Norman, 2006. "The strategy of professional forecasting," Journal of Financial Economics, Elsevier, vol. 81(2), pages 441-466, August. [Downloadable!] (restricted)
Jordi Pons-Novell, 2003. "Strategic bias, herding behaviour and economic forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 22(1), pages 67-77. [Downloadable!]
Granato, J. & Guse, E. & Sunny Wong, M.C., 2006. "Learning from the Expectations of Others," Cambridge Working Papers in Economics 0605, Faculty of Economics, University of Cambridge. [Downloadable!]
Other versions:
- Jim Granato & Eran Guse & Sunny Wong, 2006. "Learning From the Expectations of Others," Computing in Economics and Finance 2006 449, Society for Computational Economics.
- Granato, Jim & Guse, Eran A. & Wong, M. C. Sunny, 2008. "Learning From The Expectations Of Others," Macroeconomic Dynamics, Cambridge University Press, vol. 12(03), pages 345-377, June. [Downloadable!]
Siddiqi, Hammad, 2006. "Belief merging and revision under social influence: An explanation for the volatility clustering puzzle," MPRA Paper 657, University Library of Munich, Germany. [Downloadable!]

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