  We present a model of a forecaster who must predict the future value of a
variable that depends on an exogenous state and on the intervention of a
policymaker. Our focus is on the incentives of the forecaster to acquire costly
private information to use in his forecasting exercise. We show that the
policy-making environment plays a crucial role in determining the incentives of
the forecaster to acquire information. Key parameters are the expected strength
of policy intervention, the precision of the policymaker's private information,
and the precision of public information. We identify conditions, which are
plausible in applications, under which the forecaster optimally acquires little
or no private information, and instead bases his forecast exclusively on
information publicly known at the time the forecast is made. Furthermore we
show that, also under plausible conditions, stronger policy intervention and
more precise policymaker's information crowd-out forecaster's information
acquisition.

Theoretical Economics