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Identifying the source of information rigidities in the expectations formation process

Author

Listed:
  • Mototsugu Shintani
  • Kozo Ueda

Abstract

Coibion and Gorodnichenko (2015) provide a useful framework to test the null hypothesis of full-information rational expectations against two popular classes of information rigidities, sticky information (SI) and noisy information (NI). However, the observational equivalence of SI and NI in average forecast errors gives no power in the test for one against the other. We identify the source of information rigidities by estimating the equations for the average forecast errors and variance of forecasts. The results show the importance of both SI and NI, but favor a type of NI in which agents quickly learn the underlying state.

Suggested Citation

  • Mototsugu Shintani & Kozo Ueda, 2021. "Identifying the source of information rigidities in the expectations formation process," CAMA Working Papers 2021-48, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2021-48
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-06/48_2021_Shintani_Ueda.pdf
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    Cited by:

    1. Weiyang ZHAI & Yushi YOSHIDA, 2026. "Inflation Expectations in Japan: Forecast revision and forecast trends," Discussion papers 26004, Research Institute of Economy, Trade and Industry (RIETI).
    2. Born, Benjamin & Enders, Zeno & Müller, Gernot, 2023. "On FIRE, news, and expectations," CEPR Discussion Papers 18259, C.E.P.R. Discussion Papers.
      • Born, Benjamin & Enders, Zeno & Müller, Gernot J., 2023. "On FIRE, news, and expectations," Working Papers 42, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
    3. repec:upd:utmpwp:042 is not listed on IDEAS
    4. Coulombe, Raphaelle G. & McNeil, James, 2025. "The term structure of interest rates in a noisy information model," Journal of International Money and Finance, Elsevier, vol. 159(C).
    5. Toshitaka Sekine & Frank Packer & Shunichi Yoneyama, 2022. "Individual Trend Inflation," IMES Discussion Paper Series 22-E-14, Institute for Monetary and Economic Studies, Bank of Japan.

    More about this item

    Keywords

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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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