Identifying the source of information rigidities in the expectations formation process

Mototsugu Shintani and Kozo Ueda

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

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.

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)
Pages: 24 pages
Date: 2021-06
New Economics Papers: this item is included in nep-exp and nep-mac
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Identifying the source of information rigidities in the expectations formation process (2023)
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:een:camaaa:2021-48

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