IDEAS home Printed from https://ideas.repec.org/p/awi/wpaper/0727.html

Measuring Inflation Expectations: How the Response Scale Shapes Density Forecasts

Author

Listed:
  • Becker, Christoph
  • Duersch, Peter
  • Eife, Thomas

Abstract

In density forecasts, respondents are asked to assign probabilities to pre-specified ranges of inflation. We show in two large-scale experiments that responses vary when we modify the response scale. Asking an identical question with modified response scales induces different answers: Shifting, compressing or expanding the scale leads to shifted, compressed and expanded forecasts. Mean forecast, uncertainty, and disagreement can change by several percentage points. We discuss implications for survey design and how central banks can adjust the response scales during times of high inflation.

Suggested Citation

  • Becker, Christoph & Duersch, Peter & Eife, Thomas, 2023. "Measuring Inflation Expectations: How the Response Scale Shapes Density Forecasts," Working Papers 0727, University of Heidelberg, Department of Economics.
    • Handle: RePEc:awi:wpaper:0727
    Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
    as

    Download full text from publisher

    File URL: https://nbn-resolving.de/urn:nbn:de:bsz:16-heidok-332324
    File Function: Frontdoor page on HeiDOK
    Download Restriction: no
    File URL: https://archiv.ub.uni-heidelberg.de/volltextserver/33232/1/Becker_et_al_2023_dp727.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Maxime Phillot & Rina Rosenblatt-Wisch, 2018. "Inflation Expectations: The Effect of Question Ordering on Forecast Inconsistencies," Working Papers 2018-11, Swiss National Bank.
    2. Beckmann, Elisabeth & Schmidt, Tobias, 2020. "Bundesbank online pilot survey on consumer expectations," Technical Papers 01/2020, Deutsche Bundesbank.
    3. Leo Van Hove & Ronny Verbraecken, 2025. "Gender roles and inflation expectations: D’Acunto et al. revisited," Review of Economics of the Household, Springer, vol. 23(2), pages 797-818, June.
    4. Olivier Coibion & Yuriy Gorodnichenko & Saten Kumar, 2018. "How Do Firms Form Their Expectations? New Survey Evidence," American Economic Review, American Economic Association, vol. 108(9), pages 2671-2713, September.
    5. Olivier Coibion & Yuriy Gorodnichenko & Michael Weber, 2022. "Monetary Policy Communications and Their Effects on Household Inflation Expectations," Journal of Political Economy, University of Chicago Press, vol. 130(6), pages 1537-1584.
    6. Michael Woodford, 2005. "Central bank communication and policy effectiveness," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 399-474.
    7. Adeline Delavande & Susann Rohwedder, 2011. "Individuals' uncertainty about future social security benefits and portfolio choice," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 498-519, April.
    8. Engelberg, Joseph & Manski, Charles F. & Williams, Jared, 2009. "Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 30-41.
    9. Coibion, Olivier & Gorodnichenko, Yuriy & Kumar, Saten & Pedemonte, Mathieu, 2020. "Inflation expectations as a policy tool?," Journal of International Economics, Elsevier, vol. 124(C).
    10. Eda Gulsen & Hakan Kara, 2019. "Measuring inflation uncertainty in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 19(2), pages 33-43.
    11. Alexander Glas & Matthias Hartmann, 2022. "Uncertainty measures from partially rounded probabilistic forecast surveys," Quantitative Economics, Econometric Society, vol. 13(3), pages 979-1022, July.
    12. Becker, Christoph Karl & Duersch, Peter & Eife, Thomas & Glas, Alexander, 2025. "Personalizing probabilistic survey scales," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    13. Charles F. Manski, 2018. "Survey Measurement of Probabilistic Macroeconomic Expectations: Progress and Promise," NBER Macroeconomics Annual, University of Chicago Press, vol. 32(1), pages 411-471.
    14. Michael Weber & Francesco D'Acunto & Yuriy Gorodnichenko & Olivier Coibion, 2022. "The Subjective Inflation Expectations of Households and Firms: Measurement, Determinants, and Implications," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 157-184, Summer.
    15. Gwangmin Kim & Carola Binder, 2023. "Learning-through-Survey in Inflation Expectations," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(2), pages 254-278, April.
    16. Olivier Coibion & Yuriy Gorodnichenko, 2012. "What Can Survey Forecasts Tell Us about Information Rigidities?," Journal of Political Economy, University of Chicago Press, vol. 120(1), pages 116-159.
    17. Ulrike Malmendier & Stefan Nagel, 2016. "Learning from Inflation Experiences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(1), pages 53-87.
    18. Becker, Christoph & Duersch, Peter & Eife, Thomas & Glas, Alexander, 2021. "Extending the Procedure of Engelberg et al. (2009) to Surveys with Varying Interval-Widths," Working Papers 0707, University of Heidelberg, Department of Economics.
    19. Olivier Coibion & Yuriy Gorodnichenko, 2015. "Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts," American Economic Review, American Economic Association, vol. 105(8), pages 2644-2678, August.
    20. Goldfayn-Frank, Olga & Kieren, Pascal & Trautmann, Stefan, 2026. "A choice-based approach to the measurement of inflation expectations," Journal of Monetary Economics, Elsevier, vol. 157(C).
    21. Gonzalez-Fernandez, Pedro & Bosch-Rosa, Ciril & Meissner, Thomas, 2025. "Direct Elicitation of Parametric Belief Distributions: An application to inflation expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 233(C).
    22. Elyas Fermand & Camelia M. Kuhnen & Geng Li & Itzhak Ben-David, 2024. "Extrapolative Uncertainty and Household Economic Behavior," Management Science, INFORMS, vol. 70(8), pages 5607-5625, August.
    23. Francesco D’Acunto & Ulrike Malmendier & Michael Weber, 2021. "Gender roles produce divergent economic expectations," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 118(21), pages 2008534118-, May.
    24. repec:hal:wpaper:halshs-03816349 is not listed on IDEAS
    25. Paolo Crosetto & Thomas De Haan, 2022. "Comparing input interfaces to elicit belief distributions," Working Papers 2022-01, Grenoble Applied Economics Laboratory (GAEL).
    26. Zhao, Yongchen, 2023. "Internal consistency of household inflation expectations: Point forecasts vs. density forecasts," International Journal of Forecasting, Elsevier, vol. 39(4), pages 1713-1735.
    27. 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.
    28. Valerie R. Boctor & Olivier Coibion & Yuriy Gorodnichenko & Michael Weber, 2024. "On Eliciting Subjective Probability Distributions of Expectations," NBER Working Papers 32406, National Bureau of Economic Research, Inc.
    29. Olivier Armantier & Giorgio Topa & Wilbert Van der Klaauw & Basit Zafar, 2017. "An overview of the Survey of Consumer Expectations," Economic Policy Review, Federal Reserve Bank of New York, issue 23-2, pages 51-72.
    30. Wändi Bruine De Bruin & Charles F. Manski & Giorgio Topa & Wilbert van der Klaauw, 2011. "Measuring consumer uncertainty about future inflation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 454-478, April.
    31. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, September.
    32. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    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. Pavlova, Lora, 2024. "Framing effects in consumer expectations surveys," ZEW Discussion Papers 24-036, ZEW - Leibniz Centre for European Economic Research.
    2. Goldfayn-Frank, Olga & Kieren, Pascal & Trautmann, Stefan, 2026. "A choice-based approach to the measurement of inflation expectations," Journal of Monetary Economics, Elsevier, vol. 157(C).
    3. Becker, Christoph & Dürsch, Peter & Eife, Thomas A. & Glas, Alexander, 2023. "Households' probabilistic inflation expectations in high-inflation regimes," ZEW Discussion Papers 23-072, ZEW - Leibniz Centre for European Economic Research.
    4. Comerford, David A., 2025. "Cognitive reflection, arithmetic ability and financial literacy independently predict both inflation expectations and forecast accuracy," International Journal of Forecasting, Elsevier, vol. 41(2), pages 517-531.
    5. Becker, Christoph Karl & Duersch, Peter & Eife, Thomas & Glas, Alexander, 2025. "Personalizing probabilistic survey scales," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    6. Harold Glenn A. Valera & Cymon Kayle Lubangco & Mark J. Holmes, 2026. "Does repeated cross-section data help explain consumer inflation expectations revisions?," Working Papers in Economics 26/03, University of Waikato.
    7. Pavlova, Lora, 2025. "Framing effects in consumer expectations surveys," Journal of Economic Behavior & Organization, Elsevier, vol. 231(C).
    8. Knüppel, Malte & Pavlova, Lora, 2026. "Survey design and professional forecasters: The case of uncertainty in the US SPF," ZEW Discussion Papers 26-017, ZEW - Leibniz Centre for European Economic Research.
    9. Gonzalez-Fernandez, Pedro & Bosch-Rosa, Ciril & Meissner, Thomas, 2025. "Direct Elicitation of Parametric Belief Distributions: An application to inflation expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 233(C).
    10. Holm, Håkan J. & Samahita, Margaret & van Veldhuizen, Roel & Wengström, Erik, 2025. "Anchoring and subjective belief distributions," Journal of Economic Behavior & Organization, Elsevier, vol. 240(C).

    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. Becker, Christoph Karl & Duersch, Peter & Eife, Thomas & Glas, Alexander, 2025. "Personalizing probabilistic survey scales," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    2. Pavlova, Lora, 2025. "Framing effects in consumer expectations surveys," Journal of Economic Behavior & Organization, Elsevier, vol. 231(C).
    3. Goldfayn-Frank, Olga & Kieren, Pascal & Trautmann, Stefan, 2026. "A choice-based approach to the measurement of inflation expectations," Journal of Monetary Economics, Elsevier, vol. 157(C).
    4. Crump, Richard K. & Eusepi, Stefano & Tambalotti, Andrea & Topa, Giorgio, 2022. "Subjective intertemporal substitution," Journal of Monetary Economics, Elsevier, vol. 126(C), pages 118-133.
    5. Lena Dräger & Michael J. Lamla, 2024. "Consumers' macroeconomic expectations," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 427-451, April.
    6. Pavlova, Lora, 2024. "Framing effects in consumer expectations surveys," ZEW Discussion Papers 24-036, ZEW - Leibniz Centre for European Economic Research.
    7. Becker, Christoph & Dürsch, Peter & Eife, Thomas A. & Glas, Alexander, 2023. "Households' probabilistic inflation expectations in high-inflation regimes," FAU Discussion Papers in Economics 01/2023, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    8. Gonzalez-Fernandez, Pedro & Bosch-Rosa, Ciril & Meissner, Thomas, 2025. "Direct Elicitation of Parametric Belief Distributions: An application to inflation expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 233(C).
    9. Zarifhonarvar, Ali, 2026. "Generating inflation expectations with large language models," Journal of Monetary Economics, Elsevier, vol. 157(C).
    10. Francesco D’Acunto & Daniel Hoang & Maritta Paloviita & Michael Weber, 2023. "IQ, Expectations, and Choice," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(5), pages 2292-2325.
    11. Link, Sebastian & Peichl, Andreas & Roth, Christopher & Wohlfart, Johannes, 2023. "Information frictions among firms and households," Journal of Monetary Economics, Elsevier, vol. 135(C), pages 99-115.
    12. Christopher Roth & Johannes Wohlfart, 2020. "How Do Expectations about the Macroeconomy Affect Personal Expectations and Behavior?," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 731-748, October.
    13. Armantier, Olivier & Koşar, Gizem & Pomerantz, Rachel & Skandalis, Daphné & Smith, Kyle & Topa, Giorgio & van der Klaauw, Wilbert, 2021. "How economic crises affect inflation beliefs: Evidence from the Covid-19 pandemic," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 443-469.
    14. Conrad, Christian & Lahiri, Kajal, 2023. "Heterogeneous expectations among professional forecasters," ZEW Discussion Papers 23-062, ZEW - Leibniz Centre for European Economic Research.
    15. Candia, Bernardo & Coibion, Olivier & Gorodnichenko, Yuriy, 2024. "The inflation expectations of U.S. firms: Evidence from a new survey," Journal of Monetary Economics, Elsevier, vol. 145(S).
    16. Dovern, Jonas & Müller, Lena Sophia & Wohlrabe, Klaus, 2023. "Local information and firm expectations about aggregates," Journal of Monetary Economics, Elsevier, vol. 138(C), pages 1-13.
    17. repec:rbz:wpaper:11103 is not listed on IDEAS
    18. Ángelo Gutiérrez-Daza, 2024. "Business Cycles when Consumers Learn by Shopping," Working Papers 2024-12, Banco de México.
    19. Krüger, Fabian & Pavlova, Lora, 2024. "Quantifying subjective uncertainty in survey expectations," International Journal of Forecasting, Elsevier, vol. 40(2), pages 796-810.
    20. Jonas Dovern & Alexander Glas & Geoff Kenny, 2024. "Testing for differences in survey‐based density expectations: A compositional data approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(6), pages 1104-1122, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:awi:wpaper:0727. 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: Gabi Rauscher The email address of this maintainer does not seem to be valid anymore. Please ask Gabi Rauscher to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/awheide.html .

    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.