Identification of interaction effects in survey expectations: A cautionary note

Simone Alfarano and Mishael Milaković

No 75, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

Abstract: A growing body of literature reports evidence of social interaction effects in survey expectations. In this note, we argue that evidence in favor of social interaction effects should be treated with caution, or could even be spurious. Utilizing a parsimonious stochastic model of expectation formation and dynamics, we show that the existing sample sizes of survey expectations are about two orders of magnitude too small to reasonably distinguish between noise and interaction effects. Moreover, we argue that the problem is compounded by the fact that highly correlated responses among agents might not be caused by interaction effects at all, but instead by model-consistent beliefs. Ultimately, these results suggest that existing survey data cannot facilitate our understanding of the process of expectations formation.

Keywords: Survey expectations; model-consistent beliefs; social interaction; networks. (search for similar items in EconPapers)
JEL-codes: C83 D84 D85 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Identification of Interaction Effects in Survey Expectations: A Cautionary Note (2012)
Working Paper: Identification of Interaction Effects in Survey Expectations: A Cautionary Note (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:75

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