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Inattentive Professional Forecasters

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  • Hervé Le Bihan

    (Banque de France)

  • Philippe Andrade

    (Banque de France)

Abstract

Using the ECB Survey of Professional Forecasters we find evidence that those forecasters draw systematically biased predictions and disagree even if they forecast the same variable. Recent theoretical advances in the macroeconomics of imperfect information relate these bias and disagreement to theories of inattention. We provide a micro data estimation of the extent of inattention among professional forecasters. We show that, on our sample, about 20% of professional forecasters are inattentive to new information released each quarter. However, a formal test reveals that this observed inattention cannot generate the extent of systematic forecasting errors and disagreement among forecasters characterizing the data. There is more stickiness in expectations than the one the mere inattention is able to generate.

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1144.

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Date of creation: 2010
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Handle: RePEc:red:sed010:1144

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  14. Carlos Bowles & Roberta Friz & Veronique Genre & Geoff Kenny & Aidan Meyler & Tuomas Rautanen, 2007. "The ECB survey of professional forecasters (SPF) – A review after eight years’ experience," Occasional Paper Series 59, European Central Bank.
  15. Klenow, Peter J. & Willis, Jonathan L., 2007. "Sticky information and sticky prices," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 79-99, September.
  16. Bartosz Mackowiak & Mirko Wiederholt, 2009. "Optimal Sticky Prices under Rational Inattention," American Economic Review, American Economic Association, vol. 99(3), pages 769-803, June.
  17. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  18. Michael Kiley, 2005. "A Quantitative Comparison Of Sticky-Price And Sticky-Information Models Of Price Setting," Computing in Economics and Finance 2005 183, Society for Computational Economics.
  19. Olivier Coibion & Yuriy Gorodnichenko, 2012. "Information Rigidity and the Expectations Formation Process," IMF Working Papers 12/296, International Monetary Fund.
  20. Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
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  23. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
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