Disagreement and Biases in Inflation Expectations

Capistrán, Carlos; Timmermann, Allan

doi:10.2139/ssrn.1270550

Cited by 45 publications

(53 citation statements)

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“…One important stylized fact of the literature is that -in contrast to the prevailing assumption of the rational representative agent -real world forecasters are heterogeneous in a number of aspects. This finding has also gained attention in other strands of the literature: For instance, Elliot et al (2008) recently examine heterogeneity in output projections, while Mankiw et al (2003) and Capistran and Timmermann (2009) investigate expectation heterogeneity with respect to inflation forecasts. MacDonald and Marsh (1996), Elliot and Ito (1999), Bénassy-Quéré et al (2003), and Dreger and Stadtmann (2008) all find evidence in favor of foreign exchange forecasters' heterogeneity.…”

Section: Introductionmentioning

confidence: 84%

The effects of Japanese interventions on FX-forecast heterogeneity

2010

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This paper investigates the determinants of forecast heterogeneity in the Yen-US dollar market using a panel data set from Consensus Economics. Regardless of the particular model specification and consideration of control variables we find that exchange rate misalignments increase forecast dispersion, while foreign exchange intervention of the Japanese Ministry of Finance dampens expectation heterogeneity.JEL classification: F31, D84, C33

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Section: Introductionmentioning

confidence: 84%

The effects of Japanese interventions on FX-forecast heterogeneity

2010

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“…5 The set-up follows, since the SPF provides forecasts up to …ve quarters ahead, allowing state persistence to be estimated using three equations. 6;7 Estimating these equations jointly using a SUR estimator enables me to impose cross-equation restrictions.…”

Section: Seemingly Unrelated Regression (Sur) Estimationmentioning

confidence: 99%

Perceived Inflation Persistence

Jain

2017

Journal of Business & Economic Statistics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. iii Terms of use: Documents in AbstractThe Survey of Professional Forecasters (SPF) has had vast influence on research related to better understanding expectation formation and the behaviour of macroeconomic agents. Inflation expectations, in particular, have received a great deal of attention, since they play a crucial role in determining real interest rates, the expectations-augmented Phillips curve and monetary policy. One feature of the SPF that has surprisingly not been explored is the natural way in which it can be used to extract useful measures of inflation persistence. This paper presents a new measure of U.S. inflation persistence from the point of view of a professional forecaster, referred to as perceived inflation persistence. It is built via the implied autocorrelation function that follows from the estimates obtained using a forecaster-specific state-space model. Findings indicate that perceived inflation persistence has changed over time and that forecasters are more likely to view unexpected shocks to inflation as transitory, particularly since the mid-1990s. When compared to the autocorrelation function for actual inflation, forecasters react less to shocks than the actual inflation data would suggest, since they may engage in forecast smoothing. JEL classification: E31, E37 Bank classification: Inflation and prices; Econometric and statistical methods RésuméL'enquête auprès des prévisionnistes professionnels a eu une influence considérable sur les recherches visant à acquérir une meilleure compréhension de la formation des anticipations et du comportement des agents macroéconomiques. Plus particulièrement, les attentes en matière d'inflation ont fait l'objet de nombreuses études, étant donné le rôle majeur qu'elles jouent dans la détermination des taux d'intérêt réels, de la courbe de Phillips dotée d'anticipations et de la politique monétaire. Étonnamment, un aspect qui n'a pas été exploré est la manière par laquelle cette enquête peut être utilisée pour extraire des mesures utiles de la persistance de l'inflation. L'auteure présente une nouvelle mesure de la persistance de l'inflation aux États-Unis telle qu'elle est perçue par les prévisionnistes professionnels. Cette mesure, qu'elle appelle persistance perçue de l'inflation, s'appuie sur la fonction d'autocorrélation implicite qui découle d'estimations obtenues à l'aide d'un modèle espace-état tenant compte de la spécificité de chaque prévisionniste. Les résultats indiquent que la p...

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“…Consumer in ‡ation expectations have also been central in explaining the evolution of in ‡ation in the aftermath of the …nancial crisis, …rst during the period of the "missing disin ‡ation" (during which in ‡ation was higher than would have been expected based on models with standard determinants like the magnitude of the output gap and in ‡ation expectations of professional forecasters) and subsequently, when in ‡ation was weaker than expected (Coibion and Gorodnichenko, 2015;Friedrich, 2014). However, while a substantial body of empirical research has extensively studied professional forecasters' in ‡ation expectations (among many others, see Capistran and Timmermann, 2009;Coibion and Gorodnichenko, 2010), much less is known about expectations by the households.…”

Section: Introductionmentioning

confidence: 99%

Consumers' Attitudes and Their Inflation Expectations

Ehrmann

Pfajfar

Santoro

2015

FEDS

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This paper studies consumers'in ‡ation expectations using micro-level data from the Surveys of Consumers conducted by University of Michigan. It shows that beyond the well-established socio-economic factors such as income, age or gender, other characteristics such as the households'…nancial situation and their purchasing attitudes are important determinants of their forecast accuracy. Respondents with current or expected …nancial di¢ culties, pessimistic attitudes about major purchases, or expectations that income will go down in the future have a stronger upward bias in their expectations than other households. However, their bias shrinks by more than that of the average household in response to increasing media reporting about in ‡ation. Equivalent results are found during recessions.JEL classi…cation: C53, D84, E31

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Disagreement and Biases in Inflation Expectations

Cited by 45 publications

References 54 publications

The effects of Japanese interventions on FX-forecast heterogeneity

The effects of Japanese interventions on FX-forecast heterogeneity

Perceived Inflation Persistence

Consumers' Attitudes and Their Inflation Expectations

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