Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts
- Author(s): Coibion, Olivier
- Gorodnichenko, Yuriy
- et al.
Published Web Locationhttps://eml.berkeley.edu/~ygorodni/CG_expform.pdf
We propose a new approach to test the full-information rational expectations hypothesis which can identify whether rejections of the null arise from information rigidities. This approach quantifies the economic significance of departures from the null and the underlying degree of information rigidity. Applying this approach to US 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. (JEL C53, D83, D84, E13, E31, E37)
Many UC-authored scholarly publications are freely available on this site because of the UC Academic Senate's Open Access Policy. Let us know how this access is important for you.