This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The “Psycho-analysis” of Common People’s Forecast Errors. Evidence from European Consumer Surveys

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Maurizio Bovi (ISAE - Institute for Studies and Economic Analyses)

Additional information is available for the following registered author(s):

Abstract

Persistent and widespread psychological attitudes distort both the subjective probability of future economic events and their retrospective interpretation. It could lead to a systematic gap between (over critic) judgments and (over confident) expectations - the “survey forecast error”. When it goes bad, then, psychology suggests that people could tend to become particularly optimistic towards future evolutions. It could amplify the survey forecast error. These psychological biases are in sharp contrast with the maintained rational expectations hypothesis (REH) of most macro models. Monthly data over twenty-two years reject the REH across ten European countries, supporting the psychological view on non-Muthian expectations.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.isae.it/Working_Papers/WP_95_2008_Bovi.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number 95 Classification-JEL C42, C53, C82, D12, D84..

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 29 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:isa:wpaper:95

Contact details of provider:
Postal: Piazza dell'Indipendenza, No. 4, 00185 Rome
Fax: +39-06-44482219
Email:
Web page: http://www.isae.it
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Anita Guelfi).

Related research
Keywords: Cognitive Psychology; Expectations; Measurement Errors; Survey Data.;

Other versions of this item:

This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sendhil Mullainathan & Richard H. Thaler, 2000. "Behavioral Economics," NBER Working Papers 7948, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Markus K. Brunnermeier & Jonathan A. Parker, 2004. "Optimal Expectations," NBER Working Papers 10707, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May. [Downloadable!] (restricted)
    Other versions:
  4. Mitchell, James & Weale, Martin R., 2007. "The rationality and reliability of expectations reported by British households: micro evidence from the British household panel survey," Discussion Paper Series 1: Economic Studies 2007,19, Deutsche Bundesbank, Research Centre. [Downloadable!]
  5. Das, Marcel & van Soest, Arthur, 1999. "A panel data model for subjective information on household income growth," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 409-426, December. [Downloadable!] (restricted)
    Other versions:
  6. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring. [Downloadable!] (restricted)
  7. William A. Branch, 2004. "The Theory of Rationally Heterogeneous Expectations: Evidence from Survey Data on Inflation Expectations," Economic Journal, Royal Economic Society, vol. 114(497), pages 592-621, 07. [Downloadable!] (restricted)
  8. Richard T. Curtin, 2003. "Unemployment Expectations: The Impact of Private Information on Income Uncertainty," Review of Income and Wealth, Blackwell Publishing, vol. 49(4), pages 539-554, December. [Downloadable!] (restricted)
  9. Souleles, Nicholas S, 2004. "Expectations, Heterogeneous Forecast Errors, and Consumption: Micro Evidence from the Michigan Consumer Sentiment Surveys," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 39-72, February.
  10. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126. [Downloadable!] (restricted)
  11. Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory And Anticipatory Feelings," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 55-79, February. [Downloadable!] (restricted)
    Other versions:
  12. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April. [Downloadable!] (restricted)
  13. Pesaran, M. Hashem & Weale, Martin, 2006. "Survey Expectations," Handbook of Economic Forecasting, Elsevier. [Downloadable!] (restricted)
    Other versions:
  14. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  15. Mark Doms & Norman Morin, 2004. "Consumer sentiment, the economy, and the news media," Finance and Economics Discussion Series 2004-51, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  16. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June. [Downloadable!] (restricted)
    Other versions:
  17. Das, Marcel & van Soest, Arthur, 1997. "Expected and realized income changes: Evidence from the Dutch socio-economic panel," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 137-154, January. [Downloadable!] (restricted)
    Other versions:
  18. Ricardo Reis, 2006. "Inattentive Producers," Review of Economic Studies, Blackwell Publishing, vol. 73(3), pages 793-821, 07. [Downloadable!] (restricted)
    Other versions:
  19. Sarah Brown & Karl Taylor & Robert McNabb, 2006. "Financial Expectations, Consumption and Saving: A Microeconomic Analysis," Working Papers 2006006, The University of Sheffield, Department of Economics, revised May 2006. [Downloadable!]
    Other versions:
  20. Jeff Dominitz & Charles F. Manski, 2004. "How Should We Measure Consumer Confidence?," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 51-66, Spring. [Downloadable!] (restricted)
  21. Christopher D. Carroll, 2003. "Macroeconomic Expectations Of Households And Professional Forecasters," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 269-298, February. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? A tutorial is available.

This page was last updated on 2009-11-13.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.