A multivariate analysis of forecast disagreement: Confronting models of disagreement with survey data

European Economic Review, 2015, vol. 80, issue C, 16-35

Abstract: This paper documents multivariate forecast disagreement among professional forecasters and discusses implications for models of heterogeneous expectation formation. Disagreement varies over time and is positively correlated with general (economic) uncertainty. The degree to which individual forecasters disagree with the average forecast tends to persist over time. Models of heterogeneous expectation formation can be modified by introducing heterogeneous signal-to-noise ratios to match this feature. Furthermore, disagreement about correlations of different macroeconomic variables is high on average. In general, multivariate forecast data can be used more effectively than it has been to estimate models with heterogeneous expectations and to test the mechanisms used to generate disagreement in these models.

Keywords: Macroeconomic expectation; Forecast; Imperfect information; Survey data; Disagreement (search for similar items in EconPapers)
JEL-codes: E27 E37 E52 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (53)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:80:y:2015:i:c:p:16-35

DOI: 10.1016/j.euroecorev.2015.08.009

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