The importance of time series extrapolation for macroeconomic expectations

Michael Roos () and Ulrich Schmidt

No 1723, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper presents a simple experiment on how laypeople form macroeconomic expectations. Subjects have to forecast inflation and GDP growth. By varying the information provided in different treatments, we can assess the importance of historical time-series information versus information acquired outside the experimental setting such as knowledge of expert forecasts. It turns out that the availability of historical data has a dominant impact on expectations and wipes out the influence of outside-lab information completely. Consequently, backward-looking behavior can be identified unambiguously as a decisive factor in expectation formation.

Keywords: Expectations; macroeconomic experiment; use of information; inflation forecasts (search for similar items in EconPapers)
JEL-codes: D83 D84 E37 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The Importance of Time‐Series Extrapolation for Macroeconomic Expectations (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1723

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