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Are Qualitative Inflation Expectations Useful to Predict Inflation?

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  • Rolf Scheufele

Abstract

This paper examines the properties of qualitative inflation expectations collected from economic experts for Germany. It describes their characteristics relating to rationality and Granger causality. An out-of-sample simulation study investigates whether this indicator is suitable for inflation forecasting. Results from other standard forecasting models are considered and compared with models employing survey measures. We find that a model using survey expectations outperforms most of the competing models. Moreover, we find some evidence that the survey indicator already contains information from other model types (e.g. Phillips curve models). However, the forecast quality may be further improved by completely taking into account information from some financial indicators.

Suggested Citation

  • Rolf Scheufele, 2011. "Are Qualitative Inflation Expectations Useful to Predict Inflation?," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2011(1), pages 29-53.
    • Handle: RePEc:oec:stdkab:5kgg5k52xb5c
    DOI: 10.1787/jbcma-2011-5kgg5k52xb5c
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    Cited by:

    1. Lahiri, Kajal & Zhao, Yongchen, 2015. "Quantifying survey expectations: A critical review and generalization of the Carlson–Parkin method," International Journal of Forecasting, Elsevier, vol. 31(1), pages 51-62.
    2. Pär Stockhammar & Pär Österholm, 2018. "Do inflation expectations granger cause inflation?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 403-431, August.
    3. Halina Kowalczyk & Tomasz Lyziak & Ewa Stanisławska, 2013. "A new approach to probabilistic surveys of professional forecasters and its application in the monetary policy context," NBP Working Papers 142, Narodowy Bank Polski.
    4. Mellina, Sathya & Schmidt, Tobias, 2018. "The role of central bank knowledge and trust for the public's inflation expectations," Discussion Papers 32/2018, Deutsche Bundesbank.
    5. Sunil Kumar, 2016. "Latent class analyisis for reliable measure of inflation expectation in the indian public," Papers 1603.01397, arXiv.org.
    6. Ina Nurmalia Kurniati, 2015. "Forecasting Growth Of Third Party Funds," Working Papers WP/10/2015, Bank Indonesia.
    7. Piotr Białowolski, 2011. "Forecasting inflation with consumer survey data – application of multi-group confirmatory factor analysis to elimination of the general sentiment factor," NBP Working Papers 100, Narodowy Bank Polski.
    8. Brückbauer Frank & Schröder Michael, 2023. "The ZEW Financial Market Survey Panel," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 243(3-4), pages 451-469, June.
    9. Kajal Lahiri & Yongchen Zhao, 2013. "Quantifying Heterogeneous Survey Expectations: The Carlson-Parkin Method Revisited," Discussion Papers 13-08, University at Albany, SUNY, Department of Economics.
    10. Piotr Białowolski, 2016. "The influence of negative response style on survey-based household inflation expectations," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 509-528, March.
    11. Tomasz Łyziak, 2016. "Do inflation expectations matter in a stylised New Keynesian model? The case of Poland," NBP Working Papers 234, Narodowy Bank Polski.
    12. Raïsa Basselier & David de Antonio Liedo & Jana Jonckheere & Geert Langenus, 2018. "Can inflation expectations in business or consumer surveys improve inflation forecasts?," Working Paper Research 348, National Bank of Belgium.
    13. Brückbauer, Frank & Schröder, Michael, 2021. "Data resource profile: The ZEW FMS dataset," ZEW Discussion Papers 21-100, ZEW - Leibniz Centre for European Economic Research.
    14. Mossfeldt, Marcus & Stockhammar, Pär, 2016. "Forecasting Goods and Services Inflation in Sweden," Working Papers 146, National Institute of Economic Research.

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