Do Professional Forecasters' Phillips Curves Incorporate the Beliefs of Others?

Michael Clements and Shixuan Wang

No em-dp2023-05, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: We apply functional data analysis to survey expectations data, and show that functional principal component analysis combined with functional regression analysis is a fruitful way of capturing the effects of others’ forecasts on a respondent’s inflation forecasts. We estimate forward-looking Phillips curves on each respondent’s inflation and unemployment rate forecasts, and show that for nearly a half of the respondents the forecasts of others are important. The functional principal components of the cross-sectional distributions of forecasts are shown to capture characteristics other than the mean or consensus forecast, and include forecaster disagreement.

Keywords: inflation forecasting; functional data analysis; Survey of Professional Forecasters; forecast disagreement (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2023-02-17
New Economics Papers: this item is included in nep-mon
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