Comparison of Inflation Expectations from Surveys and Markets Across Different Horizons

Rocío Elizondo and Julio A. Carrillo

No 2025-07, Working Papers from Banco de México

Abstract: This paper compares inflation expectations from surveys and markets across different horizons for Mexico, between 2000 and 2024. The analysis evalues descriptive statistics, bias, efficiency, discrepancy, convergence level, and response to inflation surprises. The results suggest that both expectations are generally biased, with exception of short-term market expectations. The two types of expectations are inefficient as they include past forecast errors and do not seem to incorporate all available information. The discrepancy between the two types of expectations is negatively related to the short-term interest rate across all horizons and positively related to inflation, its quadratic change, and exchange rate volatility for some horizons. Short- and medium-term expectations respond to inflation surprises, while long-term expectations do not. Finally, their estimated convergence level is more stable and with lower levels when information from both types of expectations is combined.

Keywords: Survey-based inflation expectations; Market-based inflation expectations; Forecast accuracy; Bias and efficiency; Discrepancy. (search for similar items in EconPapers)
JEL-codes: C12 C22 E31 E52 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-for and nep-mon
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