eprintid: 28722
rev_number: 15
eprint_status: archive
userid: 3114
dir: disk0/00/02/87/22
datestamp: 2020-07-31 09:49:33
lastmod: 2020-09-11 13:19:43
status_changed: 2020-07-31 09:49:33
type: workingPaper
metadata_visibility: show
creators_name: Hagenhoff, Tim
creators_name: Lustenhouwer, Joep
title: The role of stickiness, extrapolation and past
consensus forecasts in macroeconomic expectations
subjects: 330
divisions: 181000
keywords: expectation formation, sticky expectations, consensus forecasts, survey data
cterms_swd: extrapolation
abstract: We propose a simple model of expectation formation with three distinct deviations from fully rational expectations. In particular, forecasters’ expectations are sticky, extrapolate the most recent news about the current period, and depend on the lagged consensus forecast about the period being forecast. We find that all three biases are present in the Survey of
Professional Forecaster as well as in the Livingston Survey, and that their magnitudes depend on the forecasting horizon. Moreover, in an over-identified econometric specification, we find that the restriction on coefficients implied by our model is always close to being satisfied and in most cases not rejected. We also stress the point that using the past consensus forecast
to form expectations is a rather smart thing to do if cognitive limitations and biases cause any attempt to build an own rational forecast to fail.
date: 2020-07
id_scheme: DOI
id_number: 10.11588/heidok.00028722
schriftenreihe_cluster_id: sr-3
schriftenreihe_order: 0686
ppn_swb: 1725944472
own_urn: urn:nbn:de:bsz:16-heidok-287229
language: eng
bibsort: HAGENHOFFTTHEROLEOFS202007
full_text_status: public
series: Discussion Paper Series / University of Heidelberg, Department of Economics
volume: 0686
place_of_pub: Heidelberg
pages: 56
citation:   Hagenhoff, Tim ; Lustenhouwer, Joep  (2020) The role of stickiness, extrapolation and past consensus forecasts in macroeconomic expectations.  [Working paper]     
document_url: https://archiv.ub.uni-heidelberg.de/volltextserver/28722/1/Hagenhoff_Lustenhouwer_2020_dp686.pdf