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Simple interpolations of inflation expectations

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  • Winkelried, Diego

Abstract

In this paper, I address the issue of using fixed-event forecasts to track the evolution of rolling-event forecasts. This paper supplies a formal justification for the procedure of approximating rolling-event forecasts by averaging two fixed-event forecasts. I illustrate the methods with the computation of inflation expectations at various horizons.

Suggested Citation

  • Winkelried, Diego, 2023. "Simple interpolations of inflation expectations," Economics Letters, Elsevier, vol. 229(C).
    • Handle: RePEc:eee:ecolet:v:229:y:2023:i:c:s0165176523002550
    DOI: 10.1016/j.econlet.2023.111230
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    References listed on IDEAS

    as
    1. Siklos, Pierre L., 2013. "Sources of disagreement in inflation forecasts: An international empirical investigation," Journal of International Economics, Elsevier, vol. 90(1), pages 218-231.
    2. Aaron Mehrotra & James Yetman, 2018. "Decaying Expectations: What Inflation Forecasts Tell Us about the Anchoring of Inflation Expectations," International Journal of Central Banking, International Journal of Central Banking, vol. 14(5), pages 55-101, December.
    3. Winkelried, Diego, 2013. "Modelo de Proyección Trimestral del BCRP: Actualización y novedades," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 26, pages 9-60.
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    6. Diego Winkelried, 2017. "Inferring Inflation Expectations from Fixed-Event Forecasts," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 1-31, June.
    7. Cogley, Timothy, 2002. "A Simple Adaptive Measure of Core Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 94-113, February.
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    9. H. Bakhshi & G. Kapetanios & T. Yates, 2005. "Rational expectations and fixed-event forecasts: An application to UK inflation," Empirical Economics, Springer, vol. 30(3), pages 539-553, October.
    10. Harvey, A., 2008. "Modeling the Phillips curve with unobserved components," Cambridge Working Papers in Economics 0805, Faculty of Economics, University of Cambridge.
    11. James Yetman, 2018. "The perils of approximating fixed-horizon inflation forecasts with fixed-event forecasts," BIS Working Papers 700, Bank for International Settlements.
    12. Allan Timmermann, 2007. "An Evaluation of the World Economic Outlook Forecasts," IMF Staff Papers, Palgrave Macmillan, vol. 54(1), pages 1-33, May.
    13. Beck, Roland, 2001. "Do country fundamentals explain emerging market bond spreads?," CFS Working Paper Series 2001/02, Center for Financial Studies (CFS).
    14. Grégory Levieuge & Yannick Lucotte & Sébastien Ringuedé, 2018. "Central bank credibility and the expectations channel: evidence based on a new credibility index," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(3), pages 493-535, August.
    15. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, February.
    16. Stefan Gerlach, 2007. "Interest Rate Setting by the ECB, 1999-2006: Words and Deeds," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 1-46, September.
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    More about this item

    Keywords

    Expectation surveys; fixed-event forecasts; rolling-event forecasts;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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