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Who Believes in Fiscal Stimulus? Forecaster Heterogeneity and the Transmission of Fiscal News

Author

Listed:
  • Elahe Boskabadi
  • Hyeongwoo Kim
  • Peng Shao
  • Shuwei Zhang

Abstract

This paper studies heterogeneity in how forecasters translate fiscal stimulus news into longer-term output expectations. Using individual-level data from the Survey of Professional Forecasters, we classify forecasters according to their relative positions in the distributions of federal government spending and real GDP forecasts. A state-space model with drifting coefficients estimates the time-varying pass-through from near-term spending forecast revisions to longer-term GDP forecast revisions. We find pronounced cross-sectional asymmetry early in the sample: lower-tail forecasters exhibit substantially weaker pass-through than upper-tail forecasters, reflecting more pessimistic responses to fiscal news. Over time, lower-tail pass-through rises markedly and converges toward the relatively stable response of optimists, narrowing the initial disagreement over the transmission of fiscal news.

Suggested Citation

  • Elahe Boskabadi & Hyeongwoo Kim & Peng Shao & Shuwei Zhang, 2026. "Who Believes in Fiscal Stimulus? Forecaster Heterogeneity and the Transmission of Fiscal News," Auburn Economics Working Paper Series auwp2026-08, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2026-08
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    File URL: https://cla.auburn.edu/econwp/Archives/2026/2026-08.pdf
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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