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Inattentive professional forecasters

  • Andrade, P.
  • Le Bihan, H.

We use the ECB Survey of Professional Forecasters to characterize the dynamics of expectations at the micro level. We find that forecasters (i) have predictable forecast errors; (ii) disagree; (iii) fail to systematically update their forecasts in the wake of new information; (iv) disagree even when updating; and (v) differ in their frequency of updating and forecast performances. We argue that these micro data facts are qualitatively in line with recent models in which expectations are formed by inattentive agents. However building and estimating an expectation model that features two types of inattention, namely sticky information à la Mankiw-Reis and noisy information à la Sims, we cannot quantitatively generate the error and disagreement that are observed in the SPF data. The rejection is mainly due to the fact that professionals relatively agree on very sluggish forecasts.

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Paper provided by Banque de France in its series Working papers with number 307.

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Length: 56 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:bfr:banfra:307
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/

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  1. 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.
  2. Klenow, Peter J. & Willis, Jonathan L., 2007. "Sticky information and sticky prices," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 79-99, September.
  3. Fernando Alvarez & Francesco Lippi & Luigi Paciello, 2010. "Optimal Price Setting with Observation and Menu Costs," EIEF Working Papers Series 1010, Einaudi Institute for Economics and Finance (EIEF), revised May 2010.
  4. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  5. Yuriy Gorodnichenko & Olivier Coibion, 2010. "What can survey forecasts tell us about informational rigidities?," 2010 Meeting Papers 277, Society for Economic Dynamics.
  6. Olivier Coibion, 2007. "Testing the Sticky Information Phillips Curve," Working Papers 61, Department of Economics, College of William and Mary.
  7. Mankiw, N. Gregory & Reis, Ricardo, 2002. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Scholarly Articles 3415324, Harvard University Department of Economics.
  8. Reis, Ricardo, 2005. "Inattentive Producers," CEPR Discussion Papers 5393, C.E.P.R. Discussion Papers.
  9. Olivier Coibion & Yuriy Gorodnichenko, 2011. "Strategic Interaction among Heterogeneous Price-Setters in an Estimated DSGE Model," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 920-940, August.
  10. Robert B. Barsky & Eric R. Sims, 2009. "Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence," NBER Working Papers 15049, National Bureau of Economic Research, Inc.
  11. Jörg Döpke & Jonas Dovern & Ulrich Fritsche & Jiri Slacalek, 2008. "Sticky Information Phillips Curves: European Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1513-1520, October.
  12. Reis, Ricardo, 2005. "Inattentive Consumers," CEPR Discussion Papers 5053, C.E.P.R. Discussion Papers.
  13. Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
  14. Olivier Coibion & Yuriy Gorodnichenko, 2010. "Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts," Working Papers 102, Department of Economics, College of William and Mary.
  15. Bartosz Mackowiak & Mirko Wiederholt, 2004. "Optimal Sticky Prices under Rational Inattention," SFB 649 Discussion Papers SFB649DP2005-040, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany, revised Jul 2005.
  16. 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.
  17. Michael J. Lamla & Samad Sarferaz, 2012. "Updating Inflation Expectations," KOF Working papers 12-301, KOF Swiss Economic Institute, ETH Zurich.
  18. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  19. Zarnowitz, Victor, 1985. "Rational Expectations and Macroeconomic Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 293-311, October.
  20. 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.
  21. M. Hashem Pesaran & Martin Weale, 2005. "Survey Expectations," CESifo Working Paper Series 1599, CESifo Group Munich.
  22. Patton, Andrew J. & Timmermann, Allan, 2010. "Why do forecasters disagree? Lessons from the term structure of cross-sectional dispersion," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 803-820, October.
  23. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
  24. Carvalho Carlos, 2006. "Heterogeneity in Price Stickiness and the Real Effects of Monetary Shocks," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(3), pages 1-58, December.
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