Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271837 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 10193
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We show that updates to macroeconomic expectations among professional forecasters exhibit an offsetting pattern where increases in current-quarter predictions lead to decreases in three quarter ahead predictions. We further document evidence of individual overreaction at the quarterly frequency and a lack of overreaction at the annual frequency. We explain these facts with a model of annual anchoring in which quarterly predictions must be consistent with annual predictions. We estimate our model to fit survey expectations and show that it provides a unified explanation for our empirical facts. Furthermore, our model yields frequency-specific estimates of information frictions which imply a larger role for inattention at the annual frequency.
Subjects: 
information friction
consistency
SPF
inattention
overreaction
JEL: 
C53
D83
D84
E17
E27
E37
E47
Document Type: 
Working Paper
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