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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
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    File URL: http://dx.doi.org/10.1787/jbcma-2011-5kgg5k52xb5c
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    References listed on IDEAS

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    10. repec:ces:ifosdt:v::y:2009:i::p:11-19 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Stockhammar, Pär & Österholm, Pär, 2016. "Do Inflation Expectations Granger Cause Inflation?," Working Papers 2016:4, Örebro University, School of Business.
    2. 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.
    3. 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.
    4. Tomasz Łyziak, 2016. "Do inflation expectations matter in a stylised New Keynesian model? The case of Poland," NBP Working Papers 234, Narodowy Bank Polski, Economic Research Department.
    5. 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, Economic Research Department.
    6. Sunil Kumar, 2016. "Latent class analyisis for reliable measure of inflation expectation in the indian public," Papers 1603.01397, arXiv.org.
    7. Mossfeldt, Marcus & Stockhammar, Pär, 2016. "Forecasting Goods and Services Inflation in Sweden," Working Papers 146, National Institute of Economic Research.
    8. 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, Economic Research Department.
    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.

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