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Inflation Expectations: The Effect of Question Ordering on Forecast Inconsistencies

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  • Maxime Phillot
  • Dr. Rina Rosenblatt-Wisch

Abstract

Expectations are key in modern macroeconomics. However, due to their scant measurability, policymakers often rely on survey data. It is thus of critical importance to know the limits of survey data use. We look at inflation expectations as measured through the Deloitte CFO Survey Switzerland and respondents' sensitivity to question ordering thereof. In particular, we investigate whether forecast inconsistencies - the discrepancies between point forecasts and measures of central tendency derived from density forecasts - change significantly depending on whether the point forecast or the density forecast is asked first. We find that a) forecast inconsistencies are sizeable in the data and b) question ordering matters. Specifically, both parametric and non-parametric evaluations of consistency show that c) point forecasts tend to be significantly higher than density forecasts only for those respondents who give a density forecast first. In addition, d) characteristics such as uncertainty, firm size and economic sector relate to inconsistencies.

Suggested Citation

  • Maxime Phillot & Dr. Rina Rosenblatt-Wisch, 2018. "Inflation Expectations: The Effect of Question Ordering on Forecast Inconsistencies," Working Papers 2018-11, Swiss National Bank.
  • Handle: RePEc:snb:snbwpa:2018-11
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    File URL: https://www.snb.ch/en/publications/research/working-papers/2018/working_paper_2018_11
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    References listed on IDEAS

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    More about this item

    Keywords

    Question effects; question ordering; inflation expectations; consistency of forecasts; point forecast; density forecast;
    All these keywords.

    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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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