Why Are Inflation Forecasts Sticky? Theory and Application to France and Germany
Raouf Boucekkine () and
Caroline Jardet ()
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Caroline Jardet: Banque de France, DGEI-DCPM, Paris
No 1744, AMSE Working Papers from Aix-Marseille School of Economics, Marseille, France
This paper proposes a theoretical model of forecasts formation which implies that in presence of information observation and forecasts communication costs, rational professional forecasters might find it optimal not to revise their forecasts continuously, or at any time. The threshold time- and state-dependence of the observation review and forecasts revisions implied by this model are then tested using inflation forecast updates of professional forecasters from recent Consensus Economics panel data for France and Germany. Our empirical results support the presence of both kinds of dependence, as well as their threshold-type shape. They also imply an upper bound of the optimal time between two information observations of about six months and the co-existence of both types of costs, the observation cost being about 1.5 times larger than the communication cost.
Keywords: forecast revision; binary choice models; information and communication costs (search for similar items in EconPapers)
JEL-codes: C23 D8 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for and nep-mac
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Working Paper: Why are inflation forecasts sticky? Theory and application to France and Germany (2017)
Working Paper: Why Are Inflation Forecasts Sticky? Theory and Application to France and Germany (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1744
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