Adam Smith Business School

Professor Emi Nakamura, UC Berkeley

'Learning About the Long Run' (co-authored by L. Farmer & J. Steinsson)
Thursday 27 January, 4pm - 5.30pm
Zoom online seminar

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Abstract

Forecasts of professional forecasters are anomalous: they are biased, forecast errors are autocorrelated, and forecast revisions predict forecast errors. Sticky or noisy information models seem like unlikely explanations for these anomalies: professional forecasters pay attention constantly and have precise knowledge of the data in question. We propose that these anomalies arise because professional forecasters don’t know the model that generates the data. We show that Bayesian agents learning about hard-to-learn features of the data generating process (low frequency behaviour) can generate all the prominent aggregate anomalies emphasised in the literature. We show this for two applications: professional forecasts of nominal interest rates for the sample period 1980-2019 and CBO forecasts of GDP growth for the sample period 1976-2019. Our learning model for interest rates also provides an explanation for deviations from the expectations hypothesis of the term structure that does not rely on time-variation in risk premia.

Biography

Emi Nakamura is the Chancellor's Professor of Economics in the Berkeley Economics department. Her research focuses on monetary and fiscal policy, business cycles and macroeconomic measurement. She is a co-editor of the American Economic Review, a member of the American Academy of Arts and Sciences and co-director of the Monetary Economics program at the National Bureau of Economic Research. She serves on the Congressional Budget Office’s Panel of Economic Advisers and the Executive Committee of the American Economics Association. She is a recipient of the John Bates Clark medal, the Elaine Bennett Research Prize, the NSF Career Grant, and the Sloan Research Fellowship. She holds a PhD from Harvard University and an A.B. from Princeton University, and taught at the Columbia Economics department and Business School before joining the Berkeley Economics department in 2018.

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Further information: business-events@glasgow.ac.uk 

First published: 16 December 2021