Forecasting euro area inflation using a huge panel of survey expectations

Florian Huber, Luca Onorante and Michael Pfarrhofer

International Journal of Forecasting, 2024, vol. 40, issue 3, 1042-1054

Abstract: In this paper, we forecast euro area inflation and its main components using a massive number of time series on survey expectations obtained from the European Commission’s Business and Consumer Survey. To make the estimation of such a huge model tractable, we use recent advances in computational statistics to carry out posterior simulation and inference. Our findings suggest that including a wide range of firms’ and consumers’ opinions about future economic developments offers useful information to forecast prices and assess tail risks to inflation. These predictive improvements arise from surveys related to expected inflation and other questions related to the general economic environment. Finally, we find that firms’ expectations about the future seem to have more predictive content than consumer expectations.

Keywords: Tail forecasting; Big data; Phillips curves; Density forecasts; Business and consumer survey (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Working Paper: Forecasting euro area inflation using a huge panel of survey expectations (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:40:y:2024:i:3:p:1042-1054

DOI: 10.1016/j.ijforecast.2023.09.003

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