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Inattentive Professional Forecasters

Listed author(s):
  • Hervé Le Bihan

    (Banque de France)

  • Philippe Andrade

    (Banque de France)

Using the ECB Survey of Professional Forecasters we find evidence that those forecasters draw systematically biased predictions and disagree even if they forecast the same variable. Recent theoretical advances in the macroeconomics of imperfect information relate these bias and disagreement to theories of inattention. We provide a micro data estimation of the extent of inattention among professional forecasters. We show that, on our sample, about 20% of professional forecasters are inattentive to new information released each quarter. However, a formal test reveals that this observed inattention cannot generate the extent of systematic forecasting errors and disagreement among forecasters characterizing the data. There is more stickiness in expectations than the one the mere inattention is able to generate.

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File URL: https://economicdynamics.org/meetpapers/2010/paper_1144.pdf
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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1144.

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Date of creation: 2010
Handle: RePEc:red:sed010:1144
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. 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.
  2. Olivier Coibion & Yuriy Gorodnichenko, 2010. "Strategic Interaction among Heterogeneous Price-Setters in an Estimated DSGE Model," Working Papers 93, Department of Economics, College of William and Mary.
  3. Michael T. Kiley, 2006. "A quantitative comparison of sticky-price and sticky-information models of price setting," Finance and Economics Discussion Series 2006-45, Board of Governors of the Federal Reserve System (U.S.).
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  7. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  8. Bartosz Mackowiak & Mirko Wiederholt, 2009. "Optimal Sticky Prices under Rational Inattention," American Economic Review, American Economic Association, vol. 99(3), pages 769-803, June.
  9. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678-678.
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  17. Michael J. Lamla & Samad Sarferaz, 2012. "Updating Inflation Expectations," KOF Working papers 12-301, KOF Swiss Economic Institute, ETH Zurich.
  18. Olivier Coibion & Yuriy Gorodnichenko, 2015. "Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts," American Economic Review, American Economic Association, vol. 105(8), pages 2644-2678, August.
  19. Olivier Coibion, 2007. "Testing the Sticky Information Phillips Curve," Working Papers 61, Department of Economics, College of William and Mary.
  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. Klenow, Peter J. & Willis, Jonathan L., 2007. "Sticky information and sticky prices," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 79-99, September.
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  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.
  25. Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-735, September.
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