Inflation and output growth uncertainty in individual survey expectations
AbstractThis paper studies uncertainty using the ECB Survey of Professional Forecasters’ data. We consider both inflation and real GDP growth forecasts at the micro level and explore forecast uncertainty using two alternative measures, i.e. conventional standard deviation of individual point forecasts and the median values of individual forecasters’ uncertainty, which are based on subjective probability distributions of survey respondents. Our analysis indicates that individual inflation uncertainty is closely related to the output growth uncertainty. In forming expectations, individual forecasters seem to behave according to an uncertainty-augmented hybrid specification of the New Keynesian Phillips curve. We also find evidence that inflation uncertainty has a negative impact on economic activity by decreasing output growth and increasing inflation and lowering the price sensitiveness of aggregate supply.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 37/2012.
Length: 19 pages
Date of creation: 19 Dec 2012
Date of revision:
Publication status: Forthcoming as Paloviita, Maritta and Matti Viren, 'Inflation and output growth uncertainty in individual survey expectations' in Empirica.
Forecasting; Survey data; Expectations; Phillips curve;
Find related papers by JEL classification:
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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