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Disciplining Expectations: Using Survey Data in Learning Models

Do learning models of expectations formation capture actual expectations? In this study we address this question by using data from the Survey of Professional Forecasters in the estimation of a dynamic stochastic general equilibrium model under learning. Exploiting the moments of this data allows us to identify the parameters of the model better, particularly those related with the formation of the expectations. We find that, without the use of survey data, inflation expectations estimated under the assumption of learning capture some features of the data not related with actual expectations, such as changes in the trend of inflation. Once surveys are included, learning not only matches actual expectations but also emerges as a key determinant of inflation persistence, explaining around 30 percent, while exogenous shocks only account for approximately 15 percent.