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Information frictions across various types of inflation expectations

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  • Cornand, Camille
  • Hubert, Paul

Abstract

Understanding how the degree of information frictions varies among economic agents is of utmost importance for macroeconomic dynamics. We document and compare the frequency of forecast revisions and cross-sectional disagreement in inflation expectations among five categories of agents: households, firms, professional forecasters, policymakers and participants to laboratory experiments. First, we provide evidence of a heterogeneous frequency of forecast revisions across categories of agents, with policymakers revising more frequently their forecasts than firms and professional forecasters. Households revise less frequently. Second, all categories exhibit cross-sectional disagreement. There is however a strong heterogeneity: while policymakers and professional forecasters exhibit low disagreement, firms and households show strong disagreement. Our analysis suggests that the nature of information frictions is closer to noisy information model features. We also explore the external validity of experimental expectations.

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  • Cornand, Camille & Hubert, Paul, 2022. "Information frictions across various types of inflation expectations," European Economic Review, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:eecrev:v:146:y:2022:i:c:s001429212200099x
    DOI: 10.1016/j.euroecorev.2022.104175
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    Cited by:

    1. Meyer-Gohde, Alexander & Tzaawa-Krenzler, Mary, 2023. "Sticky information and the Taylor principle," IMFS Working Paper Series 189, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    2. Gaurav Kumar Singh & Tathagata Bandyopadhyay, 2024. "Determinants of disagreement: Learning from inflation expectations survey of households," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(2), pages 326-343, March.

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    More about this item

    Keywords

    Disagreement; Forecast revisions; Experimental forecasts; Survey forecasts; Central bank forecasts;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics

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