Unemployment Expectations and the Business Cycle
I compare unemployment expectations from the Michigan Survey of Consumers to VAR forecastable movements in unemployment. I document three key facts: First, one-half to one-third of the population expects unemployment to rise when it is falling at the end of a recession, even though the VAR predicts the fall in unemployment. Second, more people expect unemployment to rise when it is falling at the end of a recession than expect it to rise when it is rising at the beginning of a recession even though the VAR predicts these changes. Finally, the lag change in unemployment is almost as important as the VAR forecast in predicting the fraction of the population that expects unemployment to rise. Professional forecasters do not exhibit these discrepancies. Least squares learning or real time expectations do little to help explain these facts. However, delayed updating of expectations can explain some of these facts, and extrapolative expectations explains these facts best. Individuals with higher income or education are only slightly less likely to have expectations which differ from the VAR, and those whose expect more unemployment when the VAR predicts otherwise are 8-10 percent more likely to believe it is a bad time to make a major purchase.
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 12 (2012)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/bejm|
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.:
- Reis, Ricardo, 2006.
Journal of Monetary Economics,
Elsevier, vol. 53(8), pages 1761-1800, November.
- Reis, Ricardo, 2005. "Inattentive Consumers," CEPR Discussion Papers 5053, C.E.P.R. Discussion Papers.
- Ricardo Reis, 2004. "Inattentive Consumers," NBER Working Papers 10883, National Bureau of Economic Research, Inc.
- Ricardo Reis, 2004. "Inattentive Consumers," Working Papers 135, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.
- N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2003.
"Disagreement about Inflation Expectations,"
NBER Working Papers
9796, National Bureau of Economic Research, Inc.
- Mankiw, N. Gregory & Reis, Ricardo & Wolfers, Justin, 2003. "Disagreement about Inflation Expectations," Research Papers 1807, Stanford University, Graduate School of Business.
- N. Gregory Mankiw & Ricardo Augusto Marc Rocha Reis & Justin Wolfers, 2004. "Disagreement about Inflation Expectations," Yale School of Management Working Papers ysm391, Yale School of Management.
- N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2003. "Disagreement about Inflation Expectations," Harvard Institute of Economic Research Working Papers 2011, Harvard - Institute of Economic Research.
- Laibson, David I. & Fuster, Andreas & Mendel, Brock, 2010.
"Natural Expectations and Macroeconomic Fluctuations,"
9938147, Harvard University Department of Economics.
- Andreas Fuster & David Laibson & Brock Mendel, 2010. "Natural Expectations and Macroeconomic Fluctuations," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 67-84, Fall.
- Xavier Gabaix & David Laibson, 2002.
"The 6D Bias and the Equity-Premium Puzzle,"
in: NBER Macroeconomics Annual 2001, Volume 16, pages 257-330
National Bureau of Economic Research, Inc.
- Xavier Gabaix & David Laibson, 2002. "The 6D Bias and the Equity Premium Puzzle," Harvard Institute of Economic Research Working Papers 1947, Harvard - Institute of Economic Research.
- Stark, Tom & Croushore, Dean, 2002.
"Forecasting with a real-time data set for macroeconomists,"
Journal of Macroeconomics,
Elsevier, vol. 24(4), pages 507-531, December.
- Tom Stark & Dean Croushore, 2001. "Forecasting with a real-time data set for macroeconomists," Working Papers 01-10, Federal Reserve Bank of Philadelphia.
- Tom Stark and Dean Croushore, 2001. "Forecasting with a Real-Time Data Set for Macroeconomists," Computing in Economics and Finance 2001 258, Society for Computational Economics.
- Laurence Ball, 2000.
"Near-rationality and inflation in two monetary regimes,"
Federal Reserve Bank of San Francisco.
- Laurence Ball, 2000. "Near-Rationality and Inflation in Two Monetary Regimes," Economics Working Paper Archive 435, The Johns Hopkins University,Department of Economics.
- Laurence Ball, 2000. "Near-Rationality and Inflation in Two Monetary Regimes," NBER Working Papers 7988, National Bureau of Economic Research, Inc.
- Olivier Coibion & Yuriy Gorodnichenko, 2008.
"What Can Survey Forecasts Tell Us About Informational Rigidities?,"
NBER Working Papers
14586, National Bureau of Economic Research, Inc.
- Olivier Coibion & Yuriy Gorodnichenko, 2012. "What Can Survey Forecasts Tell Us about Information Rigidities?," Journal of Political Economy, University of Chicago Press, vol. 120(1), pages 116-159.
- Yuriy Gorodnichenko & Olivier Coibion, 2010. "What can survey forecasts tell us about informational rigidities?," 2010 Meeting Papers 277, Society for Economic Dynamics.
- Athanasios Orphanides & Simon Van_Norden, 2000.
"The Reliability of Output Gap Estimates in Real Time,"
Econometric Society World Congress 2000 Contributed Papers
0768, Econometric Society.
- Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
- Athanasios Orphanides & Simon van Norden, 1999. "The Reliability of Output Gap Estimates in Real Time," Macroeconomics 9907006, EconWPA.
- Athanasios Orphanides & Simon van Norden, 1999. "The reliability of output gap estimates in real time," Finance and Economics Discussion Series 1999-38, Board of Governors of the Federal Reserve System (U.S.).
- Athanasios Orphanides & Simon van Norden, 2001. "The Unreliability of Output Gap Estimates in Real Time," CIRANO Working Papers 2001s-57, CIRANO.
- Richard T. Curtin, 2003. "Unemployment Expectations: The Impact of Private Information on Income Uncertainty," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 539-554, December.
- Newey, Whitney & West, Kenneth, 2014.
"A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix,"
Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- 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.
- Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
- Athanasios Orphanides, 2001.
"Monetary Policy Rules Based on Real-Time Data,"
American Economic Review,
American Economic Association, vol. 91(4), pages 964-985, September.
- Christopher D. Carroll, 2003. "Macroeconomic Expectations of Households and Professional Forecasters," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 269298-2692.
- 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.
- Croushore, Dean & Stark, Tom, 2001.
"A real-time data set for macroeconomists,"
Journal of Econometrics,
Elsevier, vol. 105(1), pages 111-130, November.
When requesting a correction, please mention this item's handle: RePEc:bpj:bejmac:v:12:y:2012:i:1:n:1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.