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Exploring Survey-Based Inflation Forecasts

  • Luis Gil-Alana

    ()

    (Universidad de Navarra)

  • Antonio Moreno

    ()

    (Universidad de Navarra)

  • Fernando Pérez de Gracia

    ()

    (Universidad de Navarra)

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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File URL: http://www.unav.edu/documents/10174/6546776/1299001918_WP_UNAV_05_11.pdf
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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 05/11.

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Length: 44 pages
Date of creation: 22 Jan 2011
Date of revision:
Handle: RePEc:una:unccee:wp0511
Contact details of provider: Web page: http://www.unav.edu/web/facultad-de-ciencias-economicas-y-empresariales

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  1. Adam, Klaus & Padula, Mario, 2003. "Inflation dynamics and subjective expectations in the United States," Working Paper Series 0222, European Central Bank.
  2. Altissimo, Filippo & Mojon, Benoit & Zaffaroni, Paolo, 2009. "Can aggregation explain the persistence of inflation?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 231-241, March.
  3. Andrew Ang & Geert Bekaert & Min Wei, 2006. "Do macro variables, asset markets, or surveys forecast inflation better?," Finance and Economics Discussion Series 2006-15, Board of Governors of the Federal Reserve System (U.S.).
  4. Carlos Capistrán & Allan Timmermann, 2006. "Disagreement and Biases in Inflation Expectations," Working Papers 2006-07, Banco de México.
  5. Lloyd B. Thomas, 1999. "Survey Measures of Expected U.S. Inflation," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 125-144, Fall.
  6. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  7. Martin Schneider & Monika Piazzesi, 2008. "Bond Positions, Expectations, and the Yield Curve," 2008 Meeting Papers 268, Society for Economic Dynamics.
  8. Chernov, Mikhail & Mueller, Philippe, 2012. "The term structure of inflation expectations," Journal of Financial Economics, Elsevier, vol. 106(2), pages 367-394.
  9. Christopher D. Carroll, 2003. "Macroeconomic Expectations of Households and Professional Forecasters," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 269-298.
  10. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
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