Inferring inflation expectations from fixed-event forecasts

Diego Winkelried

No 2014-016, Working Papers from Banco Central de Reserva del Perú

Abstract: 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.

Keywords: Survey expectations; fixed-event forecasts; Kalman filter; inflation targeting; Latin America (search for similar items in EconPapers)
JEL-codes: C32 E37 E52 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-for, nep-lam, nep-mac and nep-mon
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Journal Article: Inferring Inflation Expectations from Fixed-Event Forecasts (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:rbp:wpaper:2014-016

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