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Inflation Forecast Uncertainty

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  • Söderlind, Paul

Abstract

We study the inflation uncertainty reported by individual forecasters in the Survey of Professional Forecasters 1969-1999. Three popular methods of estimating uncertainty from survey data are analysed in the context of models for forecasting and asset pricing. We find that inflation uncertainty fluctuates over time in a way that traditional time series models fail to capture. Instead, uncertainty is highly correlated with the level of inflation, in particular with recent positive inflation surprises. We also find that disagreement among forecasters increases with the inflation rate and causes above-average fluctuations in individual uncertainty.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2499.

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Date of creation: Jul 2000
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Handle: RePEc:cpr:ceprdp:2499

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Keywords: Survey Data; Survey of Professional Forecasters; TGARCH; VAR;

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