Learning about the Long Run

S-Tier
Journal: Journal of Political Economy
Year: 2024
Volume: 132
Issue: 10
Pages: 3334 - 3377

Authors (3)

Leland E. Farmer (not in RePEc) Emi Nakamura (University of California-Berke...) Jón Steinsson (not in RePEc)

Score contribution per author:

2.681 = (α=2.01 / 3 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Forecasts of professional forecasters are anomalous: they are biased, and forecast errors are autocorrelated and predictable by forecast revisions. We propose that these anomalies arise because professional forecasters do not know the model that generates the data. We show that Bayesian agents learning about hard-to-learn features of the world can generate all the prominent aggregate anomalies emphasized in the literature. We show this for professional forecasts of nominal interest rates and Congressional Budget Office forecasts of gross domestic product growth. Our learning model for interest rates can explain observed deviations from the expectations hypothesis of the term structure without relying on time variation in risk premia.

Technical Details

RePEc Handle
repec:ucp:jpolec:doi:10.1086/730207
Journal Field
General
Author Count
3
Added to Database
2026-01-26