Can Heterogeneous Expectations New Keynesian Models Match the Dispersion of Survey Forecasts?

Authors

• Carolina Acuña-Armenta, Marquette UniversityFollow
• Fabio Milani, University of California, Irvine

Document Type

Article

Publication Date

4-2026

Publisher

Elsevier

Source Publication

Economics Letters

Source ISSN

0165-1765

Original Item ID

DOI: 10.1016/j.econlet.2026.112909

Abstract

This paper estimates a Heterogeneous Expectations New Keynesian model to assess its ability to capture the dispersion of expectations observed in surveys. We use realized macroeconomic data and survey data on expectations in the estimation, exploiting both first moments (mean forecasts) and second moments (the cross-sectional forecast dispersion) as observables. The results reveal reasonable correlations between the model-implied and observed dispersion series. However, the model significantly overestimates the magnitude and volatility of disagreement, particularly for output, compared with their levels in survey forecasts.

Comments

Economics Letters, Vol. 263 (April 2026). DOI.

Recommended Citation

Acuña-Armenta, Carolina and Milani, Fabio, "Can Heterogeneous Expectations New Keynesian Models Match the Dispersion of Survey Forecasts?" (2026). Economics Faculty Research and Publications. 657.
https://epublications.marquette.edu/econ_fac/657