Inattention in individual expectations

Yara de Almeida Campos Cordeiro, Wagner Gaglianone and João Issler
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Yara de Almeida Campos Cordeiro: EPGE, Getulio Vargas Foundation, Brazil

Economia, 2017, vol. 17, issue 1, 40_59

Abstract: This paper investigates the expectations formation process of economic agents about inflation rate. Using the Market Expectations System of Central Bank of Brazil, we perceive that agents do not update their forecasts every period and that even agents who update disagree in their predictions. We then focus on the two most popular types of inattention models that have been discussed in the recent literature: sticky-information and noisy-information models. Estimating a hybrid model we find that, although formally fitting the Brazilian data, it happens at the cost of a much higher degree of information rigidity than observed

Keywords: Expectations; Inflation; Imperfect information; Rational inattention (search for similar items in EconPapers)
JEL-codes: C14 C52 D84 E37 (search for similar items in EconPapers)
Date: 2017
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Related works:
Working Paper: Inattention in individual expectations (2016)
Working Paper: Inattention in Individual Expectations (2015)
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