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Exploring Survey‐Based Inflation Forecasts
Author(s) -
GilAlana Luis,
Moreno Antonio,
Pérez de Gracia Fernando
Publication year - 2012
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.1235
Subject(s) - inflation (cosmology) , flexibility (engineering) , predictive power , context (archaeology) , econometrics , economics , survey data collection , macro , survey of professional forecasters , monetary policy , computer science , macroeconomics , statistics , paleontology , philosophy , physics , mathematics , management , epistemology , theoretical physics , biology , programming language
This paper first shows that survey‐based expectations (SBE) outperform standard time series models in US 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 2008 financial crisis. Copyright © 2011 John Wiley & Sons, Ltd.