Do noisy data exacerbate cyclical volatility?

Antulio Bomfim

No 1999-50, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: How does the additional uncertainty associated with noisy economic data affect business cycle fluctuations? I use a simple variant of the neoclassical growth model to show that the answer depends crucially on the assumed expectation-formation capabilities of agents. Under efficient signal extracting, noisy economic indicators dampen cyclical volatility. The opposite occurs when agents follow a simple bounded rational strategy.

Keywords: Economic indicators; Business cycles; Rational expectations (Economic theory) (search for similar items in EconPapers)
Date: 1999
New Economics Papers: this item is included in nep-dge
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