Inattention in individual expectations
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2017-01
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This paper investigates the expectations formation process of economic agents about inflation rate. Using the Market Expec-tations System of Central Bank of Brazil, we perceive that agents do not update their forecasts every period and that evenagents who update disagree in their predictions. We then focus on the two most popular types of inattention models that havebeen discussed in the recent literature: sticky-information and noisy-information models. Estimating a hybrid model we findthat, although formally fitting the Brazilian data, it happens at the cost of a much higher degree of information rigidity thanobserved.