Inferring inflation expectations from fixed-event forecasts
Often, expected inflation measured by surveys are available only as fixed-event forecasts. Even though these surveys do contain information of a complete term structure of expectations, direct inferences about them are troublesome. Records of a fixed-event forecast through time are associated with time-varying forecast horizons, and there is no straightforward way to interpolate such figures. This paper proposes an adaptation of the measurement model of Kozicki and Tinsley (2012) [“Effective use of survey information in estimating the evolution of expected inflation”, Journal of Money, Credit and Banking, 44(1), 145-169] to suit the intricacies of fixed-event data. Using the Latin American Consensus Forecasts, the model is estimated to study the behavior of inflation expectations in four inflation targeters (Chile, Colombia, Mexico and Peru). For these countries, the results suggest that the announcement of credible inflation targets has been instrumental in anchoring long-run expectations.
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