Disagreement over the Nature of Macroeconomic Shocks

James Morley, Jing Tian and Ben Zhe Wang

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

Abstract: We document that the majority of professional forecasters exhibit rationality in directional forecast revisions of key macroeconomic variables. Exploiting this property, we use the forecast revisions to construct a novel measure of disagreement over whether shocks to aggregate demand or aggregate supply are dominating in a given period of time. Unlike disagreement in terms of numerical values of forecasts, disagreement over which shocks are prevailing is procyclical, falling significantly during recessions. This disagreement can be useful to explain cross-sectional extreme forecasts, with forecasters who disagree with the consensus about the dominant type of shock having worse nowcasts for inflation. Our findings suggest that the qualitative disagreement over the nature of macroeconomic shocks contains distinct information from quantitative disagreement in terms of numerical forecasts of macroeconomic variables and from the overall level of macroeconomic uncertainty.

Keywords: forecast disagreement; shock disagreement; SPF; shock identification (search for similar items in EconPapers)
JEL-codes: D84 E66 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2026-03
New Economics Papers: this item is included in nep-cba, nep-for and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2026-21

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