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A critical re-examination of the Carlson–Parkin method

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  • Ivana Lolić
  • Petar Sorić

Abstract

The euro area has been experiencing a long period of inflation well below the targeted 2%. This has once again brought the problem of quantifying inflation expectations into the scientific focus. Within the framework of the Carlson–Parkin (CP) method, previous research has mostly focused on altering the probability distributions. Analysing as much as 2688 versions of the CP method, we prove that the distribution choice provides only minor improvements in the forecasting accuracy. On the other hand, the method assumptions (unbiased expectations and the number of survey response categories) play the pivotal role. We make an attempt to provide an assumptions-free quantification method by recognizing the fact that agents perceive ‘moderate’ inflation through the inflation targeting policy.

Suggested Citation

  • Ivana Lolić & Petar Sorić, 2018. "A critical re-examination of the Carlson–Parkin method," Applied Economics Letters, Taylor & Francis Journals, vol. 25(19), pages 1360-1363, November.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:19:p:1360-1363
    DOI: 10.1080/13504851.2017.1420880
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    Cited by:

    1. Claveria, Oscar, 2019. "Forecasting the unemployment rate using the degree of agreement in consumer unemployment expectations," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 53(1), pages 1-3.
    2. Aleksandra Rutkowska & Magdalena Szyszko, 2022. "New DTW Windows Type for Forward- and Backward-Lookingness Examination. Application for Inflation Expectation," Computational Economics, Springer;Society for Computational Economics, vol. 59(2), pages 701-718, February.
    3. Oscar Claveria, 2021. "Forecasting with Business and Consumer Survey Data," Forecasting, MDPI, vol. 3(1), pages 1-22, February.

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