We formulate a theory of expectations updating that fits the dynamics of accuracy and disagreement in a new survey of professional forecasters. We document new stylized facts, including the puzzling persistence of disagreement as uncertainty resolves. Our theory explains these facts by allowing for different channels of heterogeneity. Agents produce an initial forecast based on heterogeneous priors and are heterogeneously "inattentive." Updaters use Bayes' rule and interpret public information using possibly heterogeneous models. Structural estimation of our theory supports the conclusion that in normal times heterogeneous priors and inattention are enough to generate persistent disagreement, but not during the crisis.
Giacomini, Raffaella, Vasiliki Skreta, and Javier Turen.
"Heterogeneity, Inattention, and Bayesian Updates."
American Economic Journal: Macroeconomics,
Forecasting Models; Simulation Methods
Criteria for Decision-Making under Risk and Uncertainty
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Price Level; Inflation; Deflation
Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications