## Forecasting the Forecast of Others (1983)

Venue: | Journal of Political Economy |

Citations: | 86 - 0 self |

### BibTeX

@ARTICLE{Townsend83forecastingthe,

author = {M. Townsend and Robert M. Townsend},

title = {Forecasting the Forecast of Others},

journal = {Journal of Political Economy},

year = {1983},

pages = {546--588}

}

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Citation Context ...f the state vector xt, defined in (31) and (32), with means satisfying the recursive relationship of (23) or -'Ktl K-K E( IMf2+I) = (A - EC'N'-CA)E( MI JD2) (35) + t+l ?UN-1( Z21 12 This theorem (see =-=Kwakernaak and Sivan 1972-=-, p. 535) requires that the variancecovariance matrix M be written M = GM*G', where M* cI, N ? PI, M* positive definite, where (x, P are positive constants, and the rows of C] CA _CA2 and columns of (... |

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Citation Context ...to El (M2). Thus firms 2 need to have expectations on M' and E' (M2), say, E 2(M ) and E 2E' (MS ). Returning to market 1, it becomes apparent that there is an infinite regress problem here (see also =-=Townsend 1978-=-). In the space of mean beliefs, at least, we seem to have need of an infinite number of state variables, but then it is no longer possible to make use of standard Kalman filtering formulas. This sect... |

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Citation Context ... already present a natural propagation mechanism; and with dispersed markets or islands restricting information flows, following Phelps (1970) and the business cycle literature (see, e.g., King 1978; =-=Barro 1980-=-; Grossman and Weiss 1980), so the "forecasting-theforecasts" problem can be analyzed. Section III describes the dynamic, stochastic maximization problem confronting the individual (representative) fi... |

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Citation Context ...ution of x, conditional on y, has means and variances and x(y) = x ? XC'(C1XC' +? WWF (Y C- _ - W) (17) Ey{x - i(y)][x - x(y)]'} = 1XX - XX?C (Cx + Earns) CIXX, (18)FORECASTING 557 respectively (see =-=Bertsekas 1976-=-). Here, then, x'=[PM,-, 0 . ] w'=[O 0 * ? u2(0o)O ... O 7 2 o ... 0 0 C2 ...... 0 2y EXX= . .* 7W= 0 0 ....0 U2 0 . 2 We might note in passing that in this formulation the firm is learning about the ... |

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Citation Context ...otion of observed and unobserved state variables with the inference problems of firms. But a method of undetermined coefficients is developed, a nonlinear but tractable procedure (see also King 1978; =-=Chari 1979-=-; Sargent 1979; Barro 1980; Futia 1981). Moreover, two procedures for forecasting in this setting are described, at least on the assumption that there is full information after a finite number of peri... |

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Citation Context ...so there is already present a natural propagation mechanism; and with dispersed markets or islands restricting information flows, following Phelps (1970) and the business cycle literature (see, e.g., =-=King 1978-=-; Barro 1980; Grossman and Weiss 1980), so the "forecasting-theforecasts" problem can be analyzed. Section III describes the dynamic, stochastic maximization problem confronting the individual (repres... |

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(Show Context)
Citation Context ...ions capture the idea that firms do not respond immediately to perceived movements in market demand, giving explicit dynamics to the "static" long-run adjustment stories of standard price theory (see =-=Lucas 1967-=-). Again, a typical firm in market i is to choose a sequence of contingent plans or decision rules, kt+ I = kt+I(flt), (6) where flt is the information available to the representative firm at time t i... |