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How Do People Interpret Macroeconomic Shocks? Evidence from U.S. Survey Data
Author(s) -
GEIGER MARTIN,
SCHARLER JOHANN
Publication year - 2021
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12747
Subject(s) - survey of professional forecasters , autoregressive model , shock (circulatory) , economics , econometrics , phillips curve , survey data collection , rational expectations , variance (accounting) , taylor rule , sign (mathematics) , inflation (cosmology) , interest rate , vector autoregression , monetary policy , keynesian economics , macroeconomics , central bank , statistics , mathematics , medicine , mathematical analysis , physics , accounting , theoretical physics
We study the revision of survey expectations in response to macroeconomic shocks, which we identify in vector autoregressive models with sign restrictions. We find that survey respondents distinguish between movements along the Phillips curve and shifts of the Phillips curve, depending on the type of shock that hits the economy. In addition, interest rate expectations are revised broadly in line with a Taylor rule. Consistent with models of rational inattention, macroeconomic shocks account for a small share of the forecast error variance of survey measures elicited from consumers, while they are more relevant for the expectations of professional forecasters.