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Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts
Author:
Mr. Olivier Coibion
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Mr. Yuriy Gorodnichenko null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 296
Language:
English
Publication Date:
20 Dec 2012
DOI:
https://doi.org/10.5089/9781475519242.001
ISBN:
9781475519242
ISSN:
1018-5941
Pages:
55
Keywords:
WP; standard deviation; real GDP; growth rate; information rigidity; Numbers; Expectations; Survey Forecasts; noisy-information model; forecast error; information friction; Rational expectations; Inflation; Oil prices; Industrial production
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We propose a new approach to test the full-information rational expectations hypothesis which can identify whether rejections of the arise from information rigidities. This approach quantifies the economic significance of departures from the and the underlying degree of information rigidity. Applying this approach to U.S. 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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund