Understanding Macroeconomic Disagreement
38 Pages Posted: 10 May 2019
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
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