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Exploring Survey-Based Inflation Forecasts

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Author Info

  • Luis Gil-Alana

    ()
    (Universidad de Navarra)

  • Antonio Moreno

    ()
    (Universidad de Navarra)

  • Fernando Pérez de Gracia

    ()
    (Universidad de Navarra)

Abstract

This paper first shows that survey-based expectations (SBE) outperform standard time series models in U.S. quarterly inflation out-of-sample prediction and that the term structure of survey-based inflation forecasts has predictive power over the path of future inflation changes. It then proposes some empirical explanations for the forecasting success of survey-based inflation expectations. We show that SBE pool a large amount of heterogeneous information on inflation expectations and react more flexibly and accurately to macro conditions both contemporaneously and dynamically. We illustrate the flexibility of SBE forecasts in the context of the recent financial crisis.

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File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random4d35501bb6886/1299001918_WP_UNAV_05_11.pdf
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Bibliographic Info

Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 05/11.

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Length: 44 pages
Date of creation: 22 Jan 2011
Date of revision:
Publication status: Forthcoming on the JOURNAL OF FORECASTING
Handle: RePEc:una:unccee:wp0511

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Web page: http://www.unav.es/facultad/econom

Related research

Keywords: Inflation Forecasting; Disaggregation; Surveys; Time Series; ARIMA Models; Long Memory Time Series;

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References

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  1. Chernov, Mikhail & Mueller, Philippe, 2012. "The term structure of inflation expectations," Journal of Financial Economics, Elsevier, vol. 106(2), pages 367-394.
  2. Klaus Adam & Mario Padula, 2002. "Inflation Dynamics and Subjective Expectations in the United States," CSEF Working Papers 78, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 02 Jun 2009.
  3. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  4. Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
  5. Carlos Capistrán & Allan Timmermann, 2008. "Disagreement and Biases in Inflation Expectations," CREATES Research Papers 2008-56, School of Economics and Management, University of Aarhus.
  6. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  7. Lloyd B. Thomas, 1999. "Survey Measures of Expected U.S. Inflation," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 125-144, Fall.
  8. Altissimo, Filippo & Mojon, Benoit & Zaffaroni, Paolo, 2009. "Can aggregation explain the persistence of inflation?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 231-241, March.
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Cited by:
  1. Elmar Mertens, 2011. "Measuring the level and uncertainty of trend inflation," Finance and Economics Discussion Series 2011-42, Board of Governors of the Federal Reserve System (U.S.).

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