IDEAS home Printed from https://ideas.repec.org/a/spr/qualqt/v50y2016i2p509-528.html
   My bibliography  Save this article

The influence of negative response style on survey-based household inflation expectations

Author

Listed:
  • Piotr Białowolski

Abstract

The study identified a sub-group of respondents adopting a negative response style in consumer tendency surveys and investigated their influence on aggregate household inflation expectations. Households prone to negative response style were identified using multi-group latent class models. The data source was the State of the Household Survey, conducted following European Commission methodology, in Poland between 1999 and 2010 (45 quarters). Although group size for households with negative response style was shown to fluctuate, negative response was comparable between periods. Micro-level information on response style was used to correct inflation expectations by the creation of additional factors for respondent weights. After compensation: (1) respondent inflation expectations proved more consistent with professional forecasts; (2) there was significantly better correlation between inflation expectations and consumer confidence; (3) compensated inflation expectations demonstrated the Ball–Friedman hypothesis; whereas, this pattern did not emerge for uncorrected data. Of the available household characteristics, income and age were the only significant determinants for negative response style. Copyright The Author(s) 2016

Suggested Citation

  • 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.
    • Handle: RePEc:spr:qualqt:v:50:y:2016:i:2:p:509-528
    DOI: 10.1007/s11135-015-0161-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11135-015-0161-9
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11135-015-0161-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. Francisco Dias & Cláudia Duarte & António Rua, 2010. "Inflation expectations in the euro area: are consumers rational?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(3), pages 591-607, September.
    3. Frank Smets & Raf Wouters, 2005. "Comparing shocks and frictions in US and euro area business cycles: a Bayesian DSGE Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 161-183.
    4. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, March.
    5. Victor Zarnowitz, 1992. "Rational Expectations and Macroeconomic Forecasts," NBER Chapters, in: Business Cycles: Theory, History, Indicators, and Forecasting, pages 462-491, National Bureau of Economic Research, Inc.
    6. Forsells, Magnus & Kenny, Geoff, 2002. "The rationality of consumers' inflation expectations: survey-based evidence for the euro area," Working Paper Series 163, European Central Bank.
    7. Ang, Andrew & Bekaert, Geert & Wei, Min, 2007. "Do macro variables, asset markets, or surveys forecast inflation better?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1163-1212, May.
    8. van Herk, H. & Poortinga, Y.H. & Verhallen, T.M.M., 2004. "Response styles in rating scales : Evidence of method bias in data from 6 EU countries," Other publications TiSEM c8befc7a-f2f4-44cf-b2fc-b, Tilburg University, School of Economics and Management.
    9. Michael J. Lamla & Thomas Maag, 2012. "The Role of Media for Inflation Forecast Disagreement of Households and Professional Forecasters," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(7), pages 1325-1350, October.
    10. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
    11. Piotr Białowolski & Tomasz Kuszewski & Bartosz Witkowski, 2014. "Bayesian averaging of classical estimates in forecasting macroeconomic indicators with application of business survey data," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(1), pages 53-68, February.
    12. Branch, William A., 2007. "Sticky information and model uncertainty in survey data on inflation expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 245-276, January.
    13. Guy Moors, 2003. "Diagnosing Response Style Behavior by Means of a Latent-Class Factor Approach. Socio-Demographic Correlates of Gender Role Attitudes and Perceptions of Ethnic Discrimination Reexamined," Quality & Quantity: International Journal of Methodology, Springer, vol. 37(3), pages 277-302, August.
    14. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    15. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June.
    16. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    17. Mitchell, James & Weale, Martin R., 2007. "The rationality and reliability of expectations reported by British households: micro evidence from the British household panel survey," Discussion Paper Series 1: Economic Studies 2007,19, Deutsche Bundesbank.
    18. Bruine de Bruin, Wändi & van der Klaauw, Wilbert & Topa, Giorgio & Downs, Julie S. & Fischhoff, Baruch & Armantier, Olivier, 2012. "The effect of question wording on consumers’ reported inflation expectations," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 749-757.
    19. Mitchell, James & Weale, Martin R., 2007. "The rationality and reliability of expectations reported by British households: micro evidence from the British household panel survey," Discussion Paper Series 1: Economic Studies 2007,19, Deutsche Bundesbank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Čižmešija Mirjana & Lukač Zrinka & Novoselec Tomislav, 2019. "Nonlinear optimisation approach to proposing novel Croatian Industrial Confidence Indicator," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 5(2), pages 17-26, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Magdalena Szyszko, 2017. "Central Banks Inflation Forecast and Expectations. A Comparative Analysis," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(3), pages 286-299.
    2. Péter Gábriel, 2010. "Household inflation expectations and inflation dynamics," MNB Working Papers 2010/12, Magyar Nemzeti Bank (Central Bank of Hungary).
    3. Balazs VARGA & Zsolt DARVAS, 2010. "Time-Varying Coefficient Methods to Measure Inflation Persistence," EcoMod2010 259600167, EcoMod.
    4. Refet S. Gürkaynak & Brian Sack & Jonathan H. Wright, 2010. "The TIPS Yield Curve and Inflation Compensation," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 70-92, January.
    5. Tsyplakov, Alexander, 2010. "The links between inflation and inflation uncertainty at the longer horizon," MPRA Paper 26908, University Library of Munich, Germany.
    6. Neil Dias Karunaratne & Ramprasad Bhar, 2010. "Regime-Shifts & Post-Float Inflation Dynamics In Australia," Discussion Papers Series 405, School of Economics, University of Queensland, Australia.
    7. Glas, Alexander & Hartmann, Matthias, 2016. "Inflation uncertainty, disagreement and monetary policy: Evidence from the ECB Survey of Professional Forecasters," Journal of Empirical Finance, Elsevier, vol. 39(PB), pages 215-228.
    8. Tsyplakov Alexander, 2010. "The links between inflation and inflation uncertainty at the longer horizon," EERC Working Paper Series 10/09e, EERC Research Network, Russia and CIS.
    9. Fuest, Angela & Schmidt, Torsten, 2017. "Inflation expectation uncertainty, inflation and the output gap," Ruhr Economic Papers 673, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    10. Binder Carola Conces, 2017. "Economic policy uncertainty and household inflation uncertainty," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(2), pages 1-20, June.
    11. Gary Koop & Luca Onorante, 2011. "Estimating Phillips Curves in Turbulent Times using the ECBs Survey of Professional Forecasters," Working Papers 1109, University of Strathclyde Business School, Department of Economics.
    12. Carlos Medel, 2017. "Forecasting Chilean inflation with the hybrid new keynesian Phillips curve: globalisation, combination, and accuracy," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 20(3), pages 004-050, December.
    13. Henry, Olan T. & Olekalns, Nilss & Suardi, Sandy, 2007. "Testing for rate dependence and asymmetry in inflation uncertainty: Evidence from the G7 economies," Economics Letters, Elsevier, vol. 94(3), pages 383-388, March.
    14. Zeynel Abidin Ozdemir, 2010. "Dynamics Of Inflation, Output Growth And Their Uncertainty In The Uk: An Empirical Analysis," Manchester School, University of Manchester, vol. 78(6), pages 511-537, December.
    15. Gregory D. Hess & Charles S. Morris, 1996. "The long-run costs of moderate inflation," Economic Review, Federal Reserve Bank of Kansas City, vol. 81(Q II), pages 71-88.
    16. Baharumshah, Ahmad Zubaidi & Slesman, Ly & Wohar, Mark E., 2016. "Inflation, inflation uncertainty, and economic growth in emerging and developing countries: Panel data evidence," Economic Systems, Elsevier, vol. 40(4), pages 638-657.
    17. Karanasos Menelaos & Schurer Stefanie, 2008. "Is the Relationship between Inflation and Its Uncertainty Linear?," German Economic Review, De Gruyter, vol. 9(3), pages 265-286, August.
    18. Ehling, Paul & Gallmeyer, Michael & Heyerdahl-Larsen, Christian & Illeditsch, Philipp, 2018. "Disagreement about inflation and the yield curve," Journal of Financial Economics, Elsevier, vol. 127(3), pages 459-484.
    19. Jessie Handbury & Tsutomu Watanabe & David E. Weinstein, 2013. "How Much Do Official Price Indexes Tell Us about Inflation?," NBER Working Papers 19504, National Bureau of Economic Research, Inc.
    20. Levent, Korap, 2009. "Enflasyon ve enflasyon belirsizliği ilişkisi için G7 ekonomileri üzerine bir inceleme [An investigation for the inflation and inflation uncertainty relationship upon the G7 economies]," MPRA Paper 19478, University Library of Munich, Germany.

    More about this item

    Keywords

    Inflation expectations; Latent class analysis; Survey response styles; C32; E31; E37;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:qualqt:v:50:y:2016:i:2:p:509-528. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.