*On the Epidemiological Microfoundations of Sticky Information

15 Pages Posted: 13 Oct 2009

See all articles by Ricardo Cavaco Nunes

Ricardo Cavaco Nunes

Federal Reserve Banks - Federal Reserve Bank of Boston

Date Written: 0000

Abstract

We estimate and compare two models in which households periodically update their expectations. The first model assumes that households update their expectations towards survey measures. In the second model, households update their expectations towards rational expectations (RE). While the literature has used these specifications indistinguishably, we argue that there are important differences. The two models imply different updating probabilities, and the data seem to prefer the second one. We then analyse the properties of both models in terms of mean expectations, median expectations, and a measure of disagreement among households. The model with periodical updates towards RE also seems to fit the data better along these dimensions.

Suggested Citation

Nunes, Ricardo Cavaco, *On the Epidemiological Microfoundations of Sticky Information (0000). Oxford Bulletin of Economics and Statistics, Vol. 71, Issue 5, pp. 643-657, October 2009, Available at SSRN: https://ssrn.com/abstract=1487807 or http://dx.doi.org/10.1111/j.1468-0084.2009.00560.x

Ricardo Cavaco Nunes (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

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