Myopia and the Term Structure of Survey Expectations

Fabio Milani

No 13101, CESifo Working Paper Series from CESifo

Abstract: This paper examines evidence for myopia, or cognitive discounting, in macroeconomic models, exploiting information from the term structure of survey expectations. I estimate a Behavioral New Keynesian model, which incorporates, as observable variables, survey forecast data on output, inflation, and interest rates at horizons ranging from one quarter to ten years ahead. When expectations data are excluded, the estimation suggests implausibly large levels of myopia. But when the model is required to match the behavior of expectations in the data, the evidence for myopia largely disappears: the myopia parameter is estimated near one. The extra discounting implied by myopia is, in fact, at odds with the term structure of expectations, which remain quite persistent across horizons, rather than reverting rapidly to steady state. These findings indicate that myopic discounting in New Keynesian frameworks is difficult to reconcile with the dynamics of expectations observed in survey data.

Keywords: Behavioral New Keynesian Model; cognitive discounting; Survey of Professional Forecasters; term structure of expectations; myopic expectations. (search for similar items in EconPapers)
JEL-codes: E31 E32 E43 E50 E70 E71 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_13101

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