Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts

Olivier Coibion and Yuriy Gorodnichenko

American Economic Review, 2015, vol. 105, issue 8, 2644-78

Abstract: We propose a new approach to test the full-information rational expectations hypothesis which can identify whether rejections of the null arise from information rigidities. This approach quantifies the economic significance of departures from the null and the underlying degree of information rigidity. Applying this approach to US and international data of professional forecasters and other agents yields pervasive evidence consistent with the presence of information rigidities. These results therefore provide a set of stylized facts which can be used to calibrate imperfect information models. Finally, we document evidence of state-dependence in the expectations formation process. (JEL C53, D83, D84, E13, E31, E37)

JEL-codes: C53 D83 D84 E13 E31 E37 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20110306
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Citations: View citations in EconPapers (727)

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Related works:
Working Paper: Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts (2012)
Working Paper: Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts (2010)
Working Paper: Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts (2010)
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