Exploring Survey-Based Inflation Forecasts

✍ Scribed by Luis Gil-Alana; Antonio Moreno; Fernando Pérez de Gracia

• Publisher: John Wiley and Sons
• Year: 2011
• Tongue: English
• Weight: 432 KB
• Volume: 31
• Category: Article
• ISSN: 0277-6693
• DOI: 10.1002/for.1235

✦ Synopsis

ABSTRACT

This paper first shows that survey‐based expectations (SBE) outperform standard time series models in US quarterly inflation out‐of‐sample prediction and that the term structure of survey‐based inflation forecasts has predictive power over the path of future inflation changes. It then proposes some empirical explanations for the forecasting success of survey‐based inflation expectations. We show that SBE pool a large amount of heterogeneous information on inflation expectations and react more flexibly and accurately to macro conditions both contemporaneously and dynamically. We illustrate the flexibility of SBE forecasts in the context of the 2008 financial crisis. Copyright © 2011 John Wiley & Sons, Ltd.