Information Rigidities in Economic Growth Forecasts: Evidence from a Large International Panel

by Jonas Dovern, Ulrich Fritsche

We examine the behavior of forecasts for real GDP growth using a large panel of individual forecasts from 30 advanced and emerging economies during 19892010. Our main findings are as follows. First, our evidence does not support the validity of the sticky information model (Mankiw and Reis, 2002) for describing the dynamics of professional growth forecasts. Instead, the empirical evidence is more in line with implications of noisy information models (Woodford, 2002; Sims, 2003). Second, we find that information rigidities are more pronounced in emerging economies than advanced economies. Third, there is evidence of nonlinearities in forecast smoothing. It is less pronounced in the tails of the distribution of individual forecast revisions than in the central part of the distribution.

25 pages, ebook

First published February 27, 2013