Prof. Javier Turen, Assistant Professor of Economics at the Pontificia Universidad Católica de Chile shares key insights from his research, "Lumpy Forecasts: How Strategic Concerns and Consensus Pressure Shape Inflation Predictions."
Professional forecasters revise their inflation forecasts in a lumpy manner - characterized by infrequent but substantial adjustments. This pattern reflects more than just new information; strategic considerations play a critical role. Specifically, forecasters are more likely to revise, and to do so by larger magnitudes, when their views diverge from the consensus.
Using a fixed-event forecasting framework, we examine how both lumpiness and peer consensus influence forecast updates. We develop a quantitative model that combines Bayesian belief updating with revision costs and strategic behavior. The model replicates key features observed in survey data, including the lumpiness and apparent overreactions to new information. Importantly, it allows us to extract a "cleansed" measure of forecasters’ true inflation beliefs - distinct from the strategic and mechanical influences that shape reported forecasts.
Dr. Javier earned his PhD in Economics from University College London, and his research interests include Applied Macroeconomics, Information Economics, and Expectation Formation.
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