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The Advantages of Probabilistic Survey Questions

Author

Listed:
  • Simon M. Potter

    (Federal Reserve Bank of New York)

  • Giorgio Topa

    (Federal Reserve Bank of New York)

  • Wilbert van den Klaauv

    (Federal Reserve Bank of New York)

Abstract

"In monetary policymaking, central bankers have long pointed out the importance of measuring the expectations of financial market participants, households, and firms - especially with regard to inflation and the central bank's so-called ""reaction function"" to changes in the economic outlook. In addition to model- and market-implied measures, there has been a growing interest in and reliance on survey-based measures of subjective expectations. This article describes two major innovative survey initiatives conducted by the New York Fed to measure policy-relevant expectations of households and market participants: the Survey of Consumer Expectations, and the Survey of Primary Dealers and Survey of Market Participants. A key feature of these surveys is its use of a probabilistic question format to elicit the likelihood respondents assign to different future events. We discuss the advantages of using probabilistic questions, illustrate their value in more fully measuring beliefs and uncertainty, and document the pervasiveness and importance of heterogeneity in beliefs among our survey respondents."

Suggested Citation

  • Simon M. Potter & Giorgio Topa & Wilbert van den Klaauv, 2017. "The Advantages of Probabilistic Survey Questions," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 9(1), pages 1-32, June.
  • Handle: RePEc:ren:journl:v:9:y:2017:i:1:p:1-32
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Just Released: Introducing the SCE Household Spending Survey
      by Blog Author in Liberty Street Economics on 2019-02-19 16:00:00

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    Cited by:

    1. Victor Aguirregabiria & Jihye Jeon, 2018. "Firms' Beliefs and Learning: Models, Identification, and Empirical Evidence," Working Papers tecipa-620, University of Toronto, Department of Economics.

    More about this item

    Keywords

    [subjective] uncertainty; probabilistic survey questions; expectation formation and updating; belief heterogeneity;

    JEL classification:

    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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