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The Factor Structure of Disagreement
We estimate a Bayesian three-dimensional dynamic factor model on the individual forecasts in the Survey of Professional Forecasters. The factors extract the most important dimensions along which disagreement comoves across variables. We interpret our results through a general semi-structural dispersed information model. The two most important factors in the data describe disagreement about aggregate supply and demand, respectively. Up until the Great Moderation, supply disagreement was dominant, while in recent decades and particularly during the Great Recession, demand disagreement was most ...
Heterogeneous inflation expectations and learning
Using the panel component of the Michigan Survey of Consumers, we estimate a learning model of inflation expectations, allowing for heterogeneous use of both private information and lifetime inflation experience. ?Life-experience inflation? has a significant impact on individual expectations, but only for one-year-ahead inflation. Public information is substantially more relevant for longer-horizon expectations. Even controlling for life-experience inflation and public information, idiosyncratic information explains a nontrivial proportion of the inflation forecasts of agents. We find that ...