Journal
AMERICAN ECONOMIC REVIEW
Volume 105, Issue 8, Pages 2644-2678Publisher
AMER ECONOMIC ASSOC
DOI: 10.1257/aer.20110306
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Funding
- NSF
- Sloan Foundation
- Direct For Social, Behav & Economic Scie [GRANTS:13735582, 1151168] Funding Source: National Science Foundation
- Divn Of Social and Economic Sciences [1151168, GRANTS:13735582] Funding Source: National Science Foundation
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We propose a new approach to test the full-information rational expectations hypothesis which can identify whether rejections of the null arise from information rigidities. This approach quantifies the economic significance of departures from the null and the underlying degree of information rigidity. Applying this approach to US 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. (JEL C53, D83, D84, E13, E31, E37)
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