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An Alternative to the Carlson-Parkin Method for the Quantification of Qualitative Inflation Expectations: Evidence from the Ifo World Economic Survey

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  • Steffen Henzel

    ()

  • Timo Wollmershäuser

Abstract

This paper presents a new methodology for the quantification of qualitative survey data. Traditional conversion methods, such as the probability approach of Carlson and Parkin (1975) or the time-varying parameters model of Seitz (1988), require very restrictive assumptions concerning the expectations formation process of survey respondents. Above all, the unbiasedness of expectations, which is a necessary condition for rationality, is imposed. Our approach avoids these assumptions. The novelty lies in the way the boundaries inside of which survey respondents expect the variable under consideration to remain unchanged are determined. Instead of deriving these boundaries from the statistical properties of the reference time-series (which necessitates the unbiasedness assumption), we directly queried them from survey respondents by a special question in the Ifo World Economic Survey. The new methodology is then applied to expectations about the future development of inflation obtained from the Ifo World Economic Survey.

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Papers No. 9.

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Date of creation: 2005
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Handle: RePEc:ces:ifowps:_9

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Related research

Keywords: Inflation expectations; survey data; quantification methods.;

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References

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  1. Jan Marc Berk, 2000. "Consumers' Inflation Expectations and Monetary Policy in Europe," MEB Series (discontinued) 2000-6, Netherlands Central Bank, Monetary and Economic Policy Department.
  2. Michela Nardo, 2003. "The Quantification of Qualitative Survey Data : A Critical Assessment," Journal of Economic Surveys, Wiley Blackwell, vol. 17(5), pages 645-668, December.
  3. Adam, Klaus & Padula, Mario, 2003. "Inflation dynamics and subjective expectations in the United States," Working Paper Series 0222, European Central Bank.
  4. Forsells, Magnus & Kenny, Geoff, 2002. "The rationality of consumers' inflation expectations: survey-based evidence for the euro area," Working Paper Series 0163, European Central Bank.
  5. Batchelor, Roy A & Orr, Adrian B, 1988. "Inflation Expectations Revisited," Economica, London School of Economics and Political Science, vol. 55(219), pages 317-31, August.
  6. Fishe, Raymond P. H. & Lahiri, Kajal, 1981. "On the estimation of inflationary expectations from qualitative responses," Journal of Econometrics, Elsevier, vol. 16(1), pages 89-102, May.
  7. Batchelor, R. A., 1986. "The psychophysics of inflation," Journal of Economic Psychology, Elsevier, vol. 7(3), pages 269-290, September.
  8. Roberts, John M., 1997. "Is inflation sticky?," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 173-196, July.
  9. Jan Marc Berk, 1999. "Measuring inflation expectations: a survey data approach," Applied Economics, Taylor & Francis Journals, vol. 31(11), pages 1467-1480.
  10. Carlson, John A & Parkin, J Michael, 1975. "Inflation Expectations," Economica, London School of Economics and Political Science, vol. 42(166), pages 123-38, May.
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Cited by:
  1. Breitung, Jörg & Schmeling, Maik, 2013. "Quantifying survey expectations: What’s wrong with the probability approach?," International Journal of Forecasting, Elsevier, vol. 29(1), pages 142-154.
  2. Evgenia Kudymowa & Johanna Plenk & Klaus Wohlrabe, 2013. "Ifo World Economic Survey und die realwirtschaftliche Entwicklung in ausgewählten Ländern," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 66(19), pages 23-30, October.
  3. Christian Müller & Aniela Wirz & Nora Sydow, 2007. "A Note on the Carlson-Parkin Method of Quantifying Qualitative Data Evidence Based on a New Data Set," KOF Working papers 07-168, KOF Swiss Economic Institute, ETH Zurich, revised May 2007.
  4. Tine Janžek & Petra Ziherl, 2013. "Overview of models and methods for measuring economic agent’s expectations," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the Sixth IFC Conference on "Statistical issues and activities in a changing environment", Basel, 28-29 August 2012., volume 36, pages 172-179 Bank for International Settlements.
  5. Evgenia Kudymowa & Johanna Plenk & Klaus Wohlrabe, 2014. "Ifo World Economic Survey and the Business Cycle in Selected Countries," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 14(4), pages 51-57, 01.
  6. Klaus Abberger & Sascha O. Becker & Barbara Hofmann & Klaus Wohlrabe, 2007. "Mikrodaten im ifo Institut für Wirtschaftsforschung: Bestand, Verwendung, Zugang," Ifo Working Paper Series Ifo Working Paper No. 44, Ifo Institute for Economic Research at the University of Munich.

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