IDEAS home Printed from https://ideas.repec.org/p/bof/bofrdp/2012_037.html
   My bibliography  Save this paper

Inflation and output growth uncertainty in individual survey expectations

Author

Listed:
  • Paloviita, Maritta
  • Virén, Matti

Abstract

This paper studies uncertainty using the ECB Survey of Professional Forecasters' data. We consider both inflation and real GDP growth forecasts at the micro level and explore forecast uncertainty using two alternative measures, i.e. conventional standard deviation of individual point forecasts and the median values of individual forecasters' uncertainty, which are based on subjective probability distributions of survey respondents. Our analysis indicates that individual inflation uncertainty is closely related to the output growth uncertainty. In forming expectations, individual forecasters seem to behave according to an uncertainty-augmented hybrid specification of the New Keynesian Phillips curve. We also find evidence that inflation uncertainty has a negative impact on economic activity by decreasing output growth and increasing inflation and lowering the price sensitiveness of aggregate supply. Key words: Forecasting, Survey data, Expectations, Phillips curve JEL Classification: C53, E37, E31

Suggested Citation

  • Paloviita, Maritta & Virén, Matti, 2012. "Inflation and output growth uncertainty in individual survey expectations," Research Discussion Papers 37/2012, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2012_037
    as

    Download full text from publisher

    File URL: https://helda.helsinki.fi/bof/bitstream/123456789/7598/1/171402.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dopke, Jorg & Fritsche, Ulrich, 2006. "When do forecasters disagree? An assessment of German growth and inflation forecast dispersion," International Journal of Forecasting, Elsevier, vol. 22(1), pages 125-135.
    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. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    4. Tillmann, Peter, 2010. "The Fed's perceived Phillips curve: Evidence from individual FOMC forecasts," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1008-1013, December.
    5. Pesaran, M. Hashem & Weale, Martin, 2006. "Survey Expectations," Handbook of Economic Forecasting, Elsevier.
    6. Kortelainen, Mika & Paloviita, Maritta & Viren, Matti, 2011. "Observed inflation forecasts and the new Keynesian macro model," Economics Letters, Elsevier, vol. 112(1), pages 88-90, July.
    7. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    8. Ralf Fendel & Eliza M. Lis & Jan‐Christoph Rülke, 2011. "Do professional forecasters believe in the Phillips curve? evidence from the G7 countries," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 30(2), pages 268-287, March.
    9. 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.
    10. Jonas Dovern & Ulrich Fritsche & Jiri Slacalek, 2012. "Disagreement Among Forecasters in G7 Countries," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1081-1096, November.
    11. Gianna Boero & Jeremy Smith & KennethF. Wallis, 2008. "Uncertainty and Disagreement in Economic Prediction: The Bank of England Survey of External Forecasters," Economic Journal, Royal Economic Society, vol. 118(530), pages 1107-1127, July.
    12. Sylvain Leduc & Zheng Liu, 2012. "Uncertainty, unemployment, and inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue sep17.
    13. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2012. "Has Economic Policy Uncertainty Hampered the Recovery?," Book Chapters,in: Lee E. Ohanian & John B. Taylor & Ian J. Wright (ed.), Government Policies and the Delayed Economic Recovery, chapter 3 Hoover Institution, Stanford University.
    14. Levi, Maurice D & Makin, John H, 1980. "Inflation Uncertainty and the Phillips Curve: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 70(5), pages 1022-1027, December.
    15. Keith Sill, 2012. "Measuring economic uncertainty using the Survey of Professional Forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 16-27.
    16. 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.
    17. 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.
    18. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    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. Oinonen, Sami & Paloviita, Maritta, 2014. "Analysis of aggregated inflation expectations based on the ECB SPF survey," Research Discussion Papers 29/2014, Bank of Finland.
    2. repec:spr:empeco:v:53:y:2017:i:1:d:10.1007_s00181-016-1181-6 is not listed on IDEAS
    3. Buss, Adrian & Dumas, Bernard & Uppal, Raman & Vilkov, Grigory, 2016. "The intended and unintended consequences of financial-market regulations: A general-equilibrium analysis," Journal of Monetary Economics, Elsevier, vol. 81(C), pages 25-43.
    4. López-Pérez, Víctor, 2016. "Does uncertainty affect non-response to the European Central Bank's survey of professional forecasters?," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 10, pages 1-47.

    More about this item

    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

    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:bof:bofrdp:2012_037. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman). General contact details of provider: http://edirc.repec.org/data/bofgvfi.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.