Abstract
About half of professional forecasters report that they use the natural rate of unemployment (u∗) to forecast. I show that forecasters' reported use of and estimates of u∗ are informative about their expectations-formation process, including their use of a Phillips curve. Those who report not using u∗ have higher and less anchored inflation expectations, and seem to have found the Federal Reserve's state-based forward guidance less credible. The Federal Open Market Committee (FOMC) publishes participants' projections of longer-run unemployment in the Summary of Economic Projections. I document how and when the FOMC participants have disagreed with each other and with the private sector, discussing possible sources of disagreement and implications for credibility.
Authors
- Carola Conces Binder
JEL codes
- E52
- E58
- E43
- D83
- D84