Evaluating Density Forecasts of Inflation: The Survey of Professional Forecasters
AbstractSince 1968, the Survey of Professional Forecasters has asked respondents to provide a" complete probability distribution of expected future inflation. We evaluate the adequacy of" those density forecasts using the framework of Diebold, Gunther and Tay (1997). The analysis" reveals several interesting features of the density forecasts in relation to realized inflation including several deficiencies of the forecasts. The probability of a large negative inflation" shock is generally overestimated, and in more recent years the probability of a large shock of" either sign is overestimated. Inflation surprises are serially correlated eventually adapt. Expectations of low inflation are associated with reduced uncertainty. The" results suggest several promising directions for future research.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6228.
Date of creation: Oct 1997
Date of revision:
Publication status: published as Cointegration, Causality and Forecasting: A Festschrift in Honor of Clive W. J. Granger, 76-90, Engleand, R. and H. Whie, eds., Oxford: Oxford University Press, 1999.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Other versions of this item:
- Francis X. Diebold & Anthony S. Tay & Kenneth F. Wallis, 1998. "Evaluating Density Forecasts of Inflation: The Survey of Professional Forecasters," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 98-15, New York University, Leonard N. Stern School of Business, Department of Economics.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
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