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

Author/Editor: Jonas Dovern | Ulrich Fritsche | Prakash Loungani | Natalia T. Tamirisa
Authorized for Distribution: February 27, 2013
Electronic Access: Free Full Text (PDF file size is 972KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We examine the behavior of forecasts for real GDP growth using a large panel of individual forecasts from 30 advanced and emerging economies during 1989–2010. 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.
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Series: Working Paper No. 13/56
Subject(s): Economic growth | Developed countries | Emerging markets | Economic forecasting
    Published:   February 27, 2013        
    ISBN/ISSN:   9781475562958/1018-5941   Format:   Paper
    Stock No:   WPIEA2013056   Pages:   24
    Price:   US$18.00
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