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Noisy Information and Fundamental Disagreement

Author

Listed:
  • Stefano Eusepi

    (Federal Reserve Bank of New York)

  • Richard Crump

    (Federal Reserve Bank of New York)

  • Emanuel Moench

    (Federal Reserve Bank of New York)

  • Philippe Andrade

    (Banque de France)

Abstract

We study the term structure of disagreement of professional forecasters for key macroeconomic variables. We document a novel set of facts: (i) forecasters disagree at all horizons including the very long run; (ii) the shape of the term structure of disagreement differs markedly across variables the term structure is downward sloping for real output growth, relatively at for CPI inflation, and upward sloping for the federal funds rate; (iii) disagreement is time varying at all horizons including the very long run. We suggest a model with noisy information and shifting long-run beliefs which is consistent with these stylized facts. Notably, our model does not rely on the heterogeneity of prior beliefs, bounded rationality or differences in the precision of signals across agents.

Suggested Citation

  • Stefano Eusepi & Richard Crump & Emanuel Moench & Philippe Andrade, 2014. "Noisy Information and Fundamental Disagreement," 2014 Meeting Papers 797, Society for Economic Dynamics.
    • Handle: RePEc:red:sed014:797
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    3. Ricco, Giovanni & Callegari, Giovanni & Cimadomo, Jacopo, 2016. "Signals from the government: Policy disagreement and the transmission of fiscal shocks," Journal of Monetary Economics, Elsevier, vol. 82(C), pages 107-118.
    4. Montes, Gabriel Caldas & Nicolay, Rodolfo Tomás da Fonseca & Acar, Tatiana, 2019. "Do fiscal communication and clarity of fiscal announcements affect public debt uncertainty? Evidence from Brazil," Journal of Economics and Business, Elsevier, vol. 103(C), pages 38-60.
    5. Hoffmann, Mathias & Hürtgen, Patrick, 2016. "Inflation expectations, disagreement, and monetary policy," Economics Letters, Elsevier, vol. 146(C), pages 59-63.
    6. Montes, Gabriel Caldas & Luna, Paulo Henrique, 2018. "Discretionary fiscal policy and disagreement in expectations about fiscal variables empirical evidence from Brazil," Economic Modelling, Elsevier, vol. 73(C), pages 100-116.
    7. Daniel Andrei & Bruce Carlin & Michael Hasler, 2014. "Model Disagreement and Economic Outlook," NBER Working Papers 20190, National Bureau of Economic Research, Inc.
    8. Montes, Gabriel Caldas & Acar, Tatiana, 2020. "Fiscal credibility, target revisions and disagreement in expectations about fiscal results," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 38-58.

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