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Expectation formation following pandemic events

Zidong An, Dingqian Liu () and Yuzheng Wu

Economics Letters, 2021, vol. 200, issue C

Abstract: Previous studies find that the degree of information rigidity is negatively associated with natural disaster shocks, recessions, and high economic uncertainty, suggesting that the expectation formation process is state dependent. Matching a large panel data of macroeconomic forecasts to the pandemic data, this letter shows that the degree of information rigidity declines significantly following pandemic events, confirming that the expectation formation process is also driven by unexpected health shocks.

Keywords: Expectation formation; Information rigidity; Forecast smoothing; Pandemic (search for similar items in EconPapers)
JEL-codes: D83 D84 E37 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.econlet.2021.109739

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