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Non-Fundamental Expectations and Economic Fluctuations: Evidence from Professional Forecasts

Keen Meng Choy (), Kenneth Leong and Anthony S Tay ()

Departmental Working Papers from National University of Singapore, Department of Economics

Abstract: It is theoretically possible that non-fundamental idiosyncratic shocks to agents’ rational expectations are a source of economic fluctuations. Studies using data on consumer and investor sentiment suggest that this is indeed a significant source of fluctuations. We present the results of a study that uses forecasts from professional forecasters to extract non-fundamental shocks to expectations. In contrast to previous studies, we show that non-fundamental expectations are not a significant source of output fluctuations.

Keywords: Non-fundamental expectations; Sunspots; Economic fluctuations; Survey of Professional Forecasters; Vector autoregressions (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-cwa, nep-ets and nep-rmg
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Journal Article: Non-fundamental expectations and economic fluctuations: Evidence from professional forecasts (2006) Downloads
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