An Alternative to the Carlson-Parkin Method for the Quantification of Qualitative Inflation Expectations: Evidence from the Ifo World Economic Survey
AbstractThis 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 InfoPaper 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.
Date of creation: 2005
Date of revision:
Inflation expectations; survey data; quantification methods.;
Find related papers by JEL classification:
- C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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