Admission Price: This event is free to attend
Speaker: Professor Raffaella Giacomini (UCL)
Series: Department of Economics Seminar Series 2016-17
This seminar is part of the Department of Economics Seminar Series 2016-17. The seminars are open to all - no registration necessary.
Surveys of professional forecasts are a key input in governmental and private sector decisions. This is the first paper to study how the design and survey features affect accuracy.
We analyse a new dataset (the Central Bank of Brazil's Focus Survey - which is uniquely suited for our goals). Agents can update any day, so we can analyse what drives their updating. Importantly, the bank runs a monthly contest that ranks forecasters based on their accuracy the day before a key piece of information is released. We find clear evidence that the contest, rather than information, is the prevailing motive for updates and accuracy improvement in the data.
Our theoretical model takes into account the dynamic structure of the forecasting problem, where accuracy improves both due to agents' effort in collecting information and due to the resolution of uncertainty during the forecasting period. Agents use a common forecasting model but face different cost-benefit ratios of effort. Only those with low enough ratios find it worthwhile to log on the system and to update.
We structurally estimate the model to uncover the deep parameters characterising the cost-benefit distribution across agents and how this changes between contest, key information dates and normal working days. The model fits the data well and the estimates allow us to perform counterfactual exercises on alternative survey designs.