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On the Epidemiological Microfoundations of Sticky Information

Praca Cavaco Nunes, Ricardo (2009) On the Epidemiological Microfoundations of Sticky Information Oxford Bulletin of Economics and Statistics, 71 (5). pp. 643-657.

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We estimate and compare two models in which households periodically update their expectations. The first model assumes that households update their expectations towards survey measures. In the second model, households update their expectations towards rational expectations (RE). While the literature has used these specifications indistinguishably, we argue that there are important differences. The two models imply different updating probabilities, and the data seem to prefer the second one. We then analyse the properties of both models in terms of mean expectations, median expectations, and a measure of disagreement among households. The model with periodical updates towards RE also seems to fit the data better along these dimensions.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
Praca Cavaco Nunes,
Date : 2009
DOI : 10.1111/j.1468-0084.2009.00560.x
Copyright Disclaimer : Published 2009. This article is a US Government work and is in the public domain in the USA.
Depositing User : Melanie Hughes
Date Deposited : 10 Oct 2017 17:44
Last Modified : 16 Jan 2019 18:57

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