SMU SOE Seminar (Apr 6, 2018): A Factor Structure of Disagreement

We document new facts about disagreement among professional forecasters. Instead of compressing disagreement into statistics of dispersion, we directly use individual response data to examine how disagreement comoves across variables and forecast horizons. Using a panel dynamic factor model to summarize the comovement of disagreement in the Survey of Professional Forecasters we find that individual expectations of output and inflation were negatively related before the Great Moderation, while the relation has turned positive afterwards. This finding indicates that forecasters now disagree more about demand factors than about supply factors. Overall, individual inflation expectations have become less related to expectations of real activity over time.