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Author: Zidong An
Publisher:
ISBN: 9781085582506
Category : Economic forecasting
Languages : en
Pages : 104
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Book Description
This dissertation consists of three essays on expectation formation process.The first chapter estimates information stickiness using the common component of professional forecasters' inattention to many economic variables. Information stickiness is hard to measure, but important for monetary policy effectiveness. Professional forecasters in the U.S. Survey of Professional Forecasters and cross-country Consensus Forecasts on average update information every three to four months. More importantly, forecaster inattention is state-dependent, and it is driven by both economic fundamentals and market volatility. Using a dynamic stochastic general equilibrium (DSGE) model with inattentive firms, this chapter characterizes the relationship between inattention and monetary policy effectiveness. Using empirical analyses, this paper confirms that monetary policy is more effective when firms are inattentive. The second chapter discusses the assumption of sticky information model and derives two novel model implications. Both ex-ante forecast disagreement and ex-post forecast accuracy are associated with the level of inattention at individual level. Between ex-ante forecast disagreement and inattention, there is a U-shaped relationship. When an individual forecaster updates information much more or much less frequently relative to the average level, she tends to have larger disagreement. Between ex-post forecast accuracy and inattention, there is a strictly negative relationship. A forecaster who tends to update her forecast more frequently is expected to have more accurate forecast. Using micro-level data, this chapter finds that forecasters are not interchangeable in terms of their forecast disagreement, forecast accuracy, and inattention. Furthermore, their empirical relationships confirm the model implications. This chapter provides an assessment of the IMF's unemployment forecasts, which have not received much scrutiny to date. The focus is on the internal consistency of the IMF's growth and unemployment forecasts, and specifically on seeing whether the relationship between the two is consistent with the relationship in the data, i.e., with Okun's Law. We find that the average performance is good, in the sense that the relationship between growth and unemployment forecasts is fairly comparable to that which prevails in the data: on average, the Okun coefficient in the forecasts mirrors the Okun coefficient in the data. Nevertheless, there is room for improvement, particularly in the year-ahead forecasts and for the group of middle-income countries. We show that a linear combination of Okun-based unemployment forecasts and WEO unemployment forecasts can deliver significant gains in forecast accuracy for developing economies.
Author: Zidong An
Publisher:
ISBN: 9781085582506
Category : Economic forecasting
Languages : en
Pages : 104
Get Book Here
Book Description
This dissertation consists of three essays on expectation formation process.The first chapter estimates information stickiness using the common component of professional forecasters' inattention to many economic variables. Information stickiness is hard to measure, but important for monetary policy effectiveness. Professional forecasters in the U.S. Survey of Professional Forecasters and cross-country Consensus Forecasts on average update information every three to four months. More importantly, forecaster inattention is state-dependent, and it is driven by both economic fundamentals and market volatility. Using a dynamic stochastic general equilibrium (DSGE) model with inattentive firms, this chapter characterizes the relationship between inattention and monetary policy effectiveness. Using empirical analyses, this paper confirms that monetary policy is more effective when firms are inattentive. The second chapter discusses the assumption of sticky information model and derives two novel model implications. Both ex-ante forecast disagreement and ex-post forecast accuracy are associated with the level of inattention at individual level. Between ex-ante forecast disagreement and inattention, there is a U-shaped relationship. When an individual forecaster updates information much more or much less frequently relative to the average level, she tends to have larger disagreement. Between ex-post forecast accuracy and inattention, there is a strictly negative relationship. A forecaster who tends to update her forecast more frequently is expected to have more accurate forecast. Using micro-level data, this chapter finds that forecasters are not interchangeable in terms of their forecast disagreement, forecast accuracy, and inattention. Furthermore, their empirical relationships confirm the model implications. This chapter provides an assessment of the IMF's unemployment forecasts, which have not received much scrutiny to date. The focus is on the internal consistency of the IMF's growth and unemployment forecasts, and specifically on seeing whether the relationship between the two is consistent with the relationship in the data, i.e., with Okun's Law. We find that the average performance is good, in the sense that the relationship between growth and unemployment forecasts is fairly comparable to that which prevails in the data: on average, the Okun coefficient in the forecasts mirrors the Okun coefficient in the data. Nevertheless, there is room for improvement, particularly in the year-ahead forecasts and for the group of middle-income countries. We show that a linear combination of Okun-based unemployment forecasts and WEO unemployment forecasts can deliver significant gains in forecast accuracy for developing economies.
Author: Jeffrey A. Levy
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 90
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Book Description
In this dissertation I examine economic uncertainty, particularly from the perspective of disaggregation below the national level. In part one I outline the building of news-based uncertainty measures for all 50 US states plus Washington DC. I analyze different search specifications, finding that the simplest set of terms involving one group for "economy" and one group for "uncertainty" has the highest resolution, while yielding similar results to more focused news searches, including one similar to the ubiquitous policy search from Baker et al. (2016), and an alternative specification designed to eliminate false positives. I also explore the differences between two other national uncertainty measures - the VIX stock market volatility index from the Chicago Board Options Exchange, and the unforecastable macroeconomic factors from Jurado et al. (2015). In part two, I build upon the analysis of the state uncertainty measures begun in part one. I show that analyzing uncertainty at the national level obscures significant state-level variation, with state-to-national uncertainty correlations ranging from 0.124 to 0.913, while some inter-state uncertainty correlations even turn negative. I then show that VAR analysis using state-level unemployment figures yields impulse response functions that are remarkably similar to existing national-level uncertainty research, with 92% of states exhibiting a rise in unemployment that peaks near 12 months after an uncertainty shock, then overshoots the starting point for a time. Finally, in part three I attempt to get at the causal effects of an uncertainty shock, as VAR analysis is unable to do, by applying a difference-in-difference framework to the natural experiment of military base closures. I look at the 1991, 1993, 1995, and 2005 rounds of the Base Realignment and Closure (BRAC) process, whereby the government moves military jobs in and out of bases through a process that is, at least initially, heavily insulated from confounding economic indicators and political influence. This creates asymmetric and exogenous uncertainty shocks in places with different military employment, which I use to show that a one-percentage point higher military share of employment causes a tenth of a percentage point higher unemployment rate in a given Metropolitan Statistical Area (MSA) during a BRAC round.
Author: Mallory Yeromonahos
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Hassan Afrouzi
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
How does competition affect information acquisition of firms and thus the response of inflation and output to monetary policy shocks? This paper addresses these questions in a new dynamic general equilibrium model with both dynamic rational inattention and oligopolistic competition. In the model, rationally inattentive firms acquire information about the endogenous beliefs of their competitors. Moreover, firms with fewer competitors endogenously choose to acquire less information about aggregate shocks - a novel prediction of the model that is supported by empirical evidence from survey data. A quantitative exercise disciplined by firm-level survey data shows that firms' strategic inattention to aggregate shocks associated with oligopolistic competition increases monetary non-neutrality by up to 77% and amplifies the half-life of output response to monetary shocks by up to 30%. Furthermore, the model matches the relationship between the number of firms' competitors and their uncertainty about inflation as a non-targeted moment.
Author: Sheri M. Markrose
Publisher:
ISBN:
Category :
Languages : en
Pages : 406
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Book Description
Author: Ruediger Bachmann
Publisher: Elsevier
ISBN: 0128234768
Category : Business & Economics
Languages : en
Pages : 876
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Book Description
Handbook of Economic Expectations discusses the state-of-the-art in the collection, study and use of expectations data in economics, including the modelling of expectations formation and updating, as well as open questions and directions for future research. The book spans a broad range of fields, approaches and applications using data on subjective expectations that allows us to make progress on fundamental questions around the formation and updating of expectations by economic agents and their information sets. The information included will help us study heterogeneity and potential biases in expectations and analyze impacts on behavior and decision-making under uncertainty. Combines information about the creation of economic expectations and their theories, applications and likely futures Provides a comprehensive summary of economics expectations literature Explores empirical and theoretical dimensions of expectations and their relevance to a wide array of subfields in economics
Author: Olivier Compte
Publisher: Cambridge University Press
ISBN: 1108422020
Category : Business & Economics
Languages : en
Pages : 303
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Book Description
Proposes novel methods to incorporate ignorance and uncertainty into economic modeling without complex mathematics.
Author: Wei Li
Publisher:
ISBN: 9781361040669
Category :
Languages : en
Pages :
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Book Description
This dissertation, "Elastic Attention, Induced Uncertainty and Aggregate Fluctuations" by Wei, Li, 李溦, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This dissertation explores the macroeconomic impact of induced uncertainty that stems from decision maker behavior: (i) finite information-processing capacity, or state uncertainty due to rational inattention; (ii) concern about model misspecifications, or model uncertainty due to robustness. It is illustrated that by incorporating these two microeconomic frictions I can better account for the inconsistency between standard full-information rational expectation models and empirical stylized facts. The first part of this thesis examines the implications for international real business cycles of a small open economy (SOE); the second part analyzes the effect on households' saving and aggregate wealth. In Chapter 1 (joint work with Yulei Luo and Jun Nie), we propose a novel explanation for one of the six major puzzles in international economics, the international consumption correlation puzzle. To the best of our knowledge, this is the first attempt to consider finite information-processing capacity in solving this puzzle. In a canonical open economy model under the complete market assumption, risk-averse consumers will insure country-specific risk using international financial markets, which leads to highly, even fully correlated consumption regardless of output correlations. However, the empirical evidence suggests that cross-country consumption is far from perfectly correlated; in fact they are lower than output correlation in most cases for G7 or OECD countries. To mitigate the discrepancy, we introduce optimal (or elastic) attention into an otherwise standard small open economy model. Agents in the model are assumed to face information-processing costs thus have limited capacity to process information when making major economic decisions. The optimal information-processing capacity is chosen in response to the amount of fundamental uncertainty, which differs across countries by nature. This can help endogenously generate heterogeneous and gradual consumption adjustments to income shocks across countries, thus improving model-fit with respect to empirical data in explaining international consumption and income correlations as well as some other key stochastic properties of the joint dynamics of consumption and income in individual countries. In Chapter 2, I analyze the determinants of aggregate wealth accumulation in an infinite-period overlapping-generations model with uninsurable income risk. The work incorporates finite information-processing capacity and the preference for robustness into the model in which decision makers are aware of model misspecifications of the distribution of future shocks and optimize against the worst-case model specification. These two types of induced uncertainty interact with income risk and growth in determining the accumulation of wealth. The interactions help better explain the relative volatility of wealth to income documented in U.S. survey data. Furthermore, it shows that the role of the induced uncertainty is prominent especially in an economy experiencing high growth. Subjects: Uncertainty Business cycles Saving and investment
Author: Sheri M. Markose
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 140
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Book Description
Author: John B. Taylor
Publisher: Elsevier
ISBN: 0444594787
Category : Business & Economics
Languages : en
Pages : 1376
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Book Description
Handbook of Macroeconomics surveys all major advances in macroeconomic scholarship since the publication of Volume 1 (1999), carefully distinguishing between empirical, theoretical, methodological, and policy issues. It courageously examines why existing models failed during the financial crisis, and also addresses well-deserved criticism head on. With contributions from the world's chief macroeconomists, its reevaluation of macroeconomic scholarship and speculation on its future constitute an investment worth making. Serves a double role as a textbook for macroeconomics courses and as a gateway for students to the latest research Acts as a one-of-a-kind resource as no major collections of macroeconomic essays have been published in the last decade
