Unravelling the Narratives Behind Macroeconomic Forecasts

What are the main narratives among the public regarding the future course of the Colombian economy, and how do they compare to those of the Central Bank of Colombia? Macroeconomic forecasts collected through surveys mainly assess observable variables; therefore, they offer little understanding of underlying narratives. Our study used a semi-structural general equilibrium model as an interpreter to infer the shocks behind Colombian economic analysts' forecasts in the Monthly Expectations Survey (MES), and thus, unravel their implicit narratives. Those narratives were compared to those implicit in the Central Bank's forecasts for each MES release at our disposal, covering a sample from 2020 to 2022. Analysts' narratives were qualitatively similar to those of the Central Bank. In particular, analysts broadly agreed with the Central Bank's view that the 2020 economic recession was driven more by demand than supply factors, and that in 2021, inflationary pressure was explained by demand recovery and adverse cost shocks. We observed that, over time, there was a tendency for the narratives of the public to converge with those of the Central Bank, which appeared to be an 'early mover' in response to economic shocks.