What can probability forecasts tell us about inflation risks?
AbstractA crucial but often ignored element of inflation expectations is the amount of perceived inflation risk. This paper estimates the degree of uncertainty and asymmetry in the probability forecasts of the Survey of Professional Forecasters (SPF) using a new methodology. The main conclusion from our analysis is that, when monitoring inflation expectations, limiting attention to a point prediction is not sufficient. The analysis of inflation expectations should take into account inflation risks. As an example, we show that our measures of inflation risks can better explain why inflation scares happened in the bond market during the Volcker disinflation. JEL Classification: C16, C42, E31, E47
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Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 0825.
Date of creation: Oct 2007
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Find related papers by JEL classification:
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-17 (All new papers)
- NEP-CBA-2007-11-17 (Central Banking)
- NEP-MAC-2007-11-17 (Macroeconomics)
- NEP-MON-2007-11-17 (Monetary Economics)
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- Gary Koop & Luca Onorante, 2011.
"Estimating Phillips Curves in Turbulent Times using the ECBs Survey of Professional Forecasters,"
1109, University of Strathclyde Business School, Department of Economics.
- Koop, Gary & Onorante, Luca, 2012. "Estimating Phillips curves in turbulent times using the ECB's survey of professional forecasters," Working Paper Series 1422, European Central Bank.
- Koop, Gary & Onorante, Luca, 2011. "Estimating Phillips Curves in Turbulent Times using the ECB’s Survey of Professional Forecasters," SIRE Discussion Papers 2011-19, Scottish Institute for Research in Economics (SIRE).
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