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Exploring Survey‐Based Inflation Forecasts

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  • Luis Gil‐Alana
  • Antonio Moreno
  • Fernando Pérez de Gracia

Abstract

This paper first shows that survey-based expectations (SBE) outperform standard time series models in U.S. quarterly inflation out-of-sample prediction and that the term structure of survey-based inflation forecasts has predictive power over the path of future inflation changes. It then proposes some empirical explanations for the forecasting success of survey-based inflation expectations. We show that SBE pool a large amount of heterogeneous information on inflation expectations and react more flexibly and accurately to macro conditions both contemporaneously and dynamically. We illustrate the flexibility of SBE forecasts in the context of the recent financial crisis.
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Suggested Citation

  • Luis Gil‐Alana & Antonio Moreno & Fernando Pérez de Gracia, 2012. "Exploring Survey‐Based Inflation Forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 31(6), pages 524-539, September.
  • Handle: RePEc:wly:jforec:v:31:y:2012:i:6:p:524-539
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    References listed on IDEAS

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    Cited by:

    1. Miah, Fazlul & Rahman, M. Saifur & Albinali, Khalid, 2016. "Rationality of survey based inflation expectations: A study of 18 emerging economies’ inflation forecasts," Research in International Business and Finance, Elsevier, vol. 36(C), pages 158-166.
    2. James M. Nason & Gregor W. Smith, 2021. "Measuring the slowly evolving trend in US inflation with professional forecasts," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(1), pages 1-17, January.
    3. Magdalena Grothe & Aidan Meyler, 2018. "Inflation Forecasts: Are Market-Based and Survey-Based Measures Informative?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(1), pages 171-188, January.
    4. 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.
    5. Elmar Mertens, 2016. "Measuring the Level and Uncertainty of Trend Inflation," The Review of Economics and Statistics, MIT Press, vol. 98(5), pages 950-967, December.
    6. Miah, Fazlul & Khalifa, Ahmed Ali & Hammoudeh, Shawkat, 2016. "Further evidence on the rationality of interest rate expectations: A comprehensive study of developed and emerging economies," Economic Modelling, Elsevier, vol. 54(C), pages 574-590.
    7. Nibbering, Didier & Paap, Richard & van der Wel, Michel, 2018. "What do professional forecasters actually predict?," International Journal of Forecasting, Elsevier, vol. 34(2), pages 288-311.
    8. Simón Sosvilla-Rivero & María del Carmen Ramos-Herrera, 2018. "Inflation, real economic growth and unemployment expectations: an empirical analysis based on the ECB survey of professional forecasters," Applied Economics, Taylor & Francis Journals, vol. 50(42), pages 4540-4555, September.
    9. Goldstein, Nathan & Zilberfarb, Ben-Zion, 2017. "Rationality and seasonality: Evidence from inflation forecasts," Economics Letters, Elsevier, vol. 150(C), pages 86-90.
    10. Helder Ferreira de Mendonça & Pedro Mendes Garcia & José Valentim Machado Vicente, 2021. "Rationality and anchoring of inflation expectations: An assessment from survey‐based and market‐based measures," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(6), pages 1027-1053, September.
    11. Hanoma, Ahmed & Nautz, Dieter, 2018. "The information content of inflation swap rates for the long-term inflation expectations of professionals: Evidence from a MIDAS analysis," Discussion Papers 2018/16, Free University Berlin, School of Business & Economics.

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    More about this item

    JEL classification:

    • 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
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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