Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts

Olivier Coibion and Yuriy Gorodnichenko

No 2012/296, IMF Working Papers from International Monetary Fund

Abstract: We propose a new approach to test the full-information rational expectations hypothesis which can identify whether rejections of the arise from information rigidities. This approach quantifies the economic significance of departures from the and the underlying degree of information rigidity. Applying this approach to U.S. and international data of professional forecasters and other agents yields pervasive evidence consistent with the presence of information rigidities. These results therefore provide a set of stylized facts which can be used to calibrate imperfect information models. Finally, we document evidence of state-dependence in the expectations formation process.

Keywords: WP; standard deviation; real GDP; growth rate; information rigidity; Numbers; Expectations; Survey Forecasts; noisy-information model; forecast error; information friction; Rational expectations; Inflation; Oil prices; Industrial production (search for similar items in EconPapers)
Pages: 55
Date: 2012-12-20
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Citations: View citations in EconPapers (36)

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Related works:
Journal Article: Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts (2015)
Working Paper: Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts (2010)
Working Paper: Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts (2010)
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