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Sluggish Forecasts

Monica Jain

Staff Working Papers from Bank of Canada

Abstract: Given the influence that agents’ expectations have on key macroeconomic variables, it is surprising that very few papers have tried to extrapolate agents’ “true” expectations directly from the data. This paper presents one such approach, starting with the hypothesis that there is sluggishness in inflation and real GDP growth forecasts. Using individual-level data on 29 U.S. professional forecasters from the Survey of Professional Forecasters, I find that some degree of sluggishness is present in about 40% of inflation forecasts and in 60% of real GDP growth forecasts. The estimates of sluggishness are then used to recover a series of sluggishness-adjusted expectations that are more volatile and, at times, more accurate than the raw survey forecasts.

Keywords: Econometric and statistical methods; Inflation and prices (search for similar items in EconPapers)
JEL-codes: E31 E37 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2018
New Economics Papers: this item is included in nep-mac
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