30 Pages Posted: 2 Jul 2020
Date Written: March 10, 2019
This study proposes a real-time estimate of inattention, based on micro-level data. I show that a simple specification that estimates the persistence of a forecaster’s deviation from the mean provides a direct estimate for parameters of information rigidity according to prominent models of expectations. Using the new specification, I revise several main findings documented in the previous literature. Inattention levels are higher, with time-variation that differs across variables. A significant variation across forecast horizons is also documented, posing a challenge to understanding expectations formation. I also report new results from long-run forecasts and document an unprecedented response to COVID-19.
Keywords: Expectations, Information Rigidity, Rational Inattention, COVID-19
JEL Classification: E3, E4, E5
Suggested Citation: Suggested Citation