Identifying the source of information rigidities in the expectations formation process

Mototsugu Shintani and Kozo Ueda

Journal of Economic Dynamics and Control, 2023, vol. 150, issue C

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 can quickly learn the underlying state.

Keywords: Imperfect information; Heterogeneity; Sticky information; Noisy information; Observational equivalence (search for similar items in EconPapers)
JEL-codes: C53 D83 D84 E13 E31 E37 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Identifying the Source of Information Rigidities in the Expectations Formation Process (2021)
Working Paper: Identifying the source of information rigidities in the expectations formation process (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:150:y:2023:i:c:s0165188923000593

DOI: 10.1016/j.jedc.2023.104653

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