Understanding Macroeconomic Disagreement

38 Pages Posted: 10 May 2019

See all articles by Jeffrey Sheen

Jeffrey Sheen

Macquarie University; Financial Research Network (FIRN); Macquarie University, Macquarie Business School

Ben Zhe Wang

Macquarie University, Macquarie Business School

Date Written: March 3, 2019

Abstract

We propose a new measure of macroeconomic disagreement, using dispersions of forecasts of a wide range of financial, activity and inflation variables from both household and professional surveys at various frequencies. With a mixed-frequency state-space model, we construct macroeconomic disagreement estimates of the one-year ahead expected state of the economy. Impulse responses show disagreement shocks lead to a contraction in economic activity, and monetary policy expansion reduces disagreement, implying that endogenous disagreement is an additional channel for countercyclical monetary policy.

Keywords: Macroeconomic disagreement, Economic uncertainty, survey data, mixed frequency, state-space model

JEL Classification: D80, E66, E50,C81

Suggested Citation

Sheen, Jeffrey and Wang, Ben Zhe, Understanding Macroeconomic Disagreement (March 3, 2019). Available at SSRN: https://ssrn.com/abstract=3364891 or http://dx.doi.org/10.2139/ssrn.3364891

Jeffrey Sheen

Macquarie University ( email )

Department of Economics
Macquarie University
Sydney, NSW 2109
Australia
+61 2 9850 7287 (Phone)
+61 2 9850 8324 (Fax)

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Ben Zhe Wang (Contact Author)

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

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