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Inattentive professional forecasters

Author

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  • Philippe Andrade
  • Hervé Le Bihan

Abstract

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 anDeestimating an expectation model that features two types of inattention, namely sticky information la Mankiw-Reis and noisy information 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.

Suggested Citation

  • Philippe Andrade & Hervé Le Bihan, 2010. "Inattentive professional forecasters," Working papers 307, Banque de France.
    • Handle: RePEc:bfr:banfra:307
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    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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