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Lookup NU author(s): Professor Atanu Ghoshray
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The present paper examines the microfoundations of how households form subjective expectations about the macroeconomy using a novel survey-based data set. In particular, we are interested in the role of perceived news. The paper outlines a model where households may give unequal importance (or weights) to ‘good’ and ‘bad’ news. We also consider whether the relationship is state-varying and has any structural changes. The ensuing empirical investigation uses time-varying smooth transition autoregressive models. We find that weights given to the news are state-varying, with little, or no, weight given to bad news. There is also a clear structural change in the relationship after September 2001.
Author(s): Easaw JZ, Ghoshray A, Heravi S
Publication type: Article
Publication status: Published
Journal: The Manchester School
Print publication date: 16/01/2014
Online publication date: 01/11/2012
Acceptance date: 05/07/2012
ISSN (print): 1463-6786
ISSN (electronic): 1467-9957
Publisher: Wiley-Blackwell Publishing Ltd.
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