Why are inflation forecasts sticky?

Frédérique Bec, Raouf Boucekkine () and Caroline Jardet ()
Additional contact information
Caroline Jardet: Banque de France, DGEI-DCPM

No 2017-17, Working Papers from Center for Research in Economics and Statistics

Abstract: 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 reviews 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)
Pages: 26 pages
Date: 2017-11-07
New Economics Papers: this item is included in nep-for, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://crest.science/RePEc/wpstorage/2017-17.pdf CREST working paper version (application/pdf)

Related works:
Working Paper: Why are inflation forecasts sticky? (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:crs:wpaper:2017-17

Access Statistics for this paper

More papers in Working Papers from Center for Research in Economics and Statistics Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Murielle Jules Maintainer-Email : murielle.jules@ensae.Fr.