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Non-Fundamental Expectations and Economic Fluctuations: Evidence from Professional Forecasts

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Author Info
Keen Meng Choy () (National University of Singapore)
Kenneth Leong
Anthony S. Tay

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Abstract

It is theoretically possible that non-fundamental idiosyncratic shocks to agents’ rational expectations are a source of economic fluctuations. Studies using data on consumer and investor sentiment suggest that this is indeed a significant source of fluctuations. We present the results of a study that uses forecasts from professional forecasters to extract non-fundamental shocks to expectations. In contrast to previous studies, we show that non-fundamental expectations are not a significant source of output fluctuations.

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Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0306.

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Date of creation: 2003
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Handle: RePEc:nus:nusewp:wp0306

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Related research
Keywords: Non-fundamental expectations; Sunspots; Economic fluctuations; Survey of Professional Forecasters; Vector autoregressions;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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References listed on IDEAS
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Cited by:
(explanations, 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. Todd E. Clark & Troy Davig, 2008. "An empirical assessment of the relationships among inflation and short- and long-term expectations," Research Working Paper RWP 08-05, Federal Reserve Bank of Kansas City. [Downloadable!]
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