Inflation uncertainty, disagreement and monetary policy: Evidence from the ECB Survey of Professional Forecasters

Alexander Glas and Matthias Hartmann ()

Journal of Empirical Finance, 2016, vol. 39, issue PB, 215-228

Abstract: We analyze the determinants of average individual inflation uncertainty and the cross-sectional variance of point forecasts (“disagreement”) based on data from the European Central Bank's Survey of Professional Forecasters. We empirically confirm the implication from a theoretical variance decomposition that disagreement is an incomplete approximation to overall uncertainty. Both measures are associated with macroeconomic conditions and indicators of monetary policy, but the relations differ qualitatively. In particular, average individual inflation uncertainty is higher during periods of expansionary monetary policy, whereas disagreement rises during contractionary periods. This implies that conclusions based on disagreement as a single indicator of ex ante uncertainty are incomplete and potentially misleading.

Keywords: Inflation uncertainty; Disagreement; Density forecast; Central banking; Survey of Professional Forecasters (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 E65 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (30)

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Working Paper: Inflation uncertainty, disagreement and monetary policy: Evidence from the ECB Survey of Professional Forecasters (2016)
Working Paper: Inflation uncertainty, disagreement and monetary policy: Evidence from the ECB Survey of Professional Forecasters (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:39:y:2016:i:pb:p:215-228

DOI: 10.1016/j.jempfin.2016.05.001

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