Are professional forecasters inattentive to public discussions about inflation? The case of Argentina

Abstract

We evaluate whether professional forecasters incorporate valuable information from public discussions on social media. The study covers the case of inflation in Argentina for the period 2016–2022. We find solid evidence consistent with inattention. A simple indicator of attention to inflation on social media is shown to anticipate professional forecast errors. A one standard deviation increment in the indicator is followed by a rise of 0.4% in mean forecast errors in the subsequent month and by a cumulative increment of 0.7% over the next 6 months. Furthermore, social media content anticipates significant revisions in forecasts that target multiple months ahead inflation and calendar year inflation. These findings are different from previously documented forms of inattention. Consistent results are verified by implementing out-of-sample forecasts and using content from an alternative social network. The study has implications for the use of professional forecasts in the context of policymaking and sheds new evidence on the nature of imperfect information in macroeconomics.