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How Informative are Aggregated Inflation Expectations? Evidence from the ECB Survey of Professional Forecasters

Author

Listed:
  • Sami Oinonen

    (Bank of Finland)

  • Maritta Paloviita

    (Bank of Finland)

Abstract

This study examines short- and long-term inflation expectations in the unbalanced panel of the ECB Survey of Professional Forecasters. We focus on dispersion of forecaster views comparing two sub-groups of survey respondents based on forecast accuracy. We then examine possible differences between regular and irregular forecasters, and assess the impacts of varying panel composition on aggregated survey information. Our analysis indicates that survey participation is not necessarily completely random, i.e., statistically independent of forecaster views or confidence levels. While the study provides evidence that aggregated survey responses are generally a reliable proxy for inflation expectations in the euro area, one should also pay attention to expectations at the micro level, especially in periods of increased forecast uncertainty.

Suggested Citation

  • Sami Oinonen & Maritta Paloviita, 2017. "How Informative are Aggregated Inflation Expectations? Evidence from the ECB Survey of Professional Forecasters," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 13(2), pages 139-163, November.
    • Handle: RePEc:spr:jbuscr:v:13:y:2017:i:2:d:10.1007_s41549-017-0017-6
    DOI: 10.1007/s41549-017-0017-6
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    References listed on IDEAS

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    1. Giordani, Paolo & Soderlind, Paul, 2003. "Inflation forecast uncertainty," European Economic Review, Elsevier, vol. 47(6), pages 1037-1059, December.
    2. Carlos Bowles & Roberta Friz & Veronique Genre & Geoff Kenny & Aidan Meyler & Tuomas Rautanen, 2007. "The ECB survey of professional forecasters (SPF) – A review after eight years’ experience," Occasional Paper Series 59, European Central Bank.
    3. Monica Jain, 2019. "Perceived Inflation Persistence," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(1), pages 110-120, January.
    4. Joshua Abel & Robert Rich & Joseph Song & Joseph Tracy, 2016. "The Measurement and Behavior of Uncertainty: Evidence from the ECB Survey of Professional Forecasters," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(3), pages 533-550, April.
    5. Andrade, Philippe & Le Bihan, Hervé, 2013. "Inattentive professional forecasters," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 967-982.
    6. Cristina Conflitti, 2012. "Measuring Uncertainty and Disagreement in the European Survey of Professional Forecasters," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2011(2), pages 69-103.
    7. Geoff Kenny & Thomas Kostka & Federico Masera, 2015. "Density characteristics and density forecast performance: a panel analysis," Empirical Economics, Springer, vol. 48(3), pages 1203-1231, May.
    8. Tsvetomira Tsenova, 2015. "Are Long-Term Inflation Expectations Well-Anchored? Evidence From The Euro Area And The United States," Bulletin of Economic Research, Wiley Blackwell, vol. 67(1), pages 65-82, January.
    9. Geoff Kenny & Thomas Kostka & Federico Masera, 2014. "How Informative are the Subjective Density Forecasts of Macroeconomists?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 33(3), pages 163-185, April.
    10. Anderson, Gareth & Maule, Becky, 2014. "Assessing the risk to inflation from inflation expectations," Bank of England Quarterly Bulletin, Bank of England, vol. 54(2), pages 148-162.
    11. Carlos Bowles & Roberta Friz & Veronique Genre & Geoff Kenny & Aidan Meyler & Tuomas Rautanen, 2010. "An Evaluation of the Growth and Unemployment Forecasts in the ECB Survey of Professional Forecasters," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2010(2), pages 1-28.
    12. Fernanda Nechio, 2015. "Have long-term inflation expectations declined?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    13. Joseph Engelberg & Charles F. Manski & Jared Williams, 2011. "Assessing the temporal variation of macroeconomic forecasts by a panel of changing composition," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(7), pages 1059-1078, November.
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    Cited by:

    1. Holmes, Mark J. & Iregui, Ana María & Otero, Jesús, 2021. "The effects of FX-interventions on forecasters disagreement: A mixed data sampling view," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    2. Oscar Claveria, 2021. "Uncertainty indicators based on expectations of business and consumer surveys," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(2), pages 483-505, May.
    3. repec:zbw:bofrdp:2018_024 is not listed on IDEAS
    4. Oscar Claveria, 2021. "On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 17(1), pages 1-26, April.
    5. Corsello, Francesco & Neri, Stefano & Tagliabracci, Alex, 2021. "Anchored or de-anchored? That is the question," European Journal of Political Economy, Elsevier, vol. 69(C).
    6. Oinonen, Sami & Viren, Matti, 2021. "Effects of Monetary Policy Decisions on Professional Forecasters' Expectations and Expectation Uncertainty," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(2), pages 245-280.
    7. Petar Soric & Oscar Claveria, 2021. "“Employment uncertainty a year after the irruption of the covid-19 pandemic”," AQR Working Papers 202104, University of Barcelona, Regional Quantitative Analysis Group, revised May 2021.
    8. Oinonen, Sami & Paloviita, Maritta & Viren, Matti, 2018. "Effects of monetary policy decisions on professional forecasters' expectations and expectations uncertainty," Bank of Finland Research Discussion Papers 24/2018, Bank of Finland.
    9. Oscar Claveria, 2020. "“Measuring and assessing economic uncertainty”," AQR Working Papers 2012003, University of Barcelona, Regional Quantitative Analysis Group, revised Jul 2020.
    10. Oinonen, Sami & Paloviita, Maritta & Viren, Matti, 2018. "Effects of monetary policy decisions on professional forecasters’ expectations and expectations uncertainty," Research Discussion Papers 24/2018, Bank of Finland.
    11. Oscar Claveria, 2020. "Business and consumer uncertainty in the face of the pandemic: A sector analysis in European countries," Papers 2012.02091, arXiv.org.
    12. Oscar Claveria, 2021. "Disagreement on expectations: firms versus consumers," SN Business & Economics, Springer, vol. 1(12), pages 1-23, December.
    13. Oscar Claveria & Petar Sorić, 2023. "Labour market uncertainty after the irruption of COVID-19," Empirical Economics, Springer, vol. 64(4), pages 1897-1945, April.

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    More about this item

    Keywords

    Survey data; Aggregated inflation expectations; Euro area; ECB SPF;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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