High disagreement among forecasters leads to stronger real effects of monetary policy
The article explores how uncertainty in economic information affects how people make decisions and respond to changes in monetary and fiscal policies. By studying disagreement among professional forecasters, the researchers found that when there is high uncertainty, prices adjust more slowly to monetary shocks, leading to stronger effects on the economy. They also developed a model showing how this happens. Additionally, the researchers investigated the impact of fiscal shocks on the economy and the role of information uncertainty in this process.