Heterogeneity, Inattention, and Bayesian Updates

Raffaella Giacomini (), Vasiliki Skreta and Javier Turen

American Economic Journal: Macroeconomics, 2020, vol. 12, issue 1, 282-309

Abstract: We formulate a theory of expectations updating that fits the dynamics of accuracy and disagreement in a new survey of professional forecasters. We document new stylized facts, including the puzzling persistence of disagreement as uncertainty resolves. Our theory explains these facts by allowing for different channels of heterogeneity. Agents produce an initial forecast based on heterogeneous priors and are heterogeneously "inattentive." Updaters use Bayes' rule and interpret public information using possibly heterogeneous models. Structural estimation of our theory supports the conclusion that in normal times heterogeneous priors and inattention are enough to generate persistent disagreement, but not during the crisis.

JEL-codes: C53 D81 D83 D84 E31 E37 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (24)

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DOI: 10.1257/mac.20180235

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