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The Advantages of Probabilistic Survey Questions

Simon Potter (), Giorgio Topa () and Wilbert van den Klaauv
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Wilbert van den Klaauv: Federal Reserve Bank of New York

Authors registered in the RePEc Author Service: Wilbert H van der Klaauw ()

Review of Economic Analysis, 2017, vol. 9, issue 1, 1-32

Abstract: "In monetary policymaking, central bankers have long pointed out the importance of measuring the expectations of financial market participants, households, and firms - especially with regard to inflation and the central bank's so-called ""reaction function"" to changes in the economic outlook. In addition to model- and market-implied measures, there has been a growing interest in and reliance on survey-based measures of subjective expectations. This article describes two major innovative survey initiatives conducted by the New York Fed to measure policy-relevant expectations of households and market participants: the Survey of Consumer Expectations, and the Survey of Primary Dealers and Survey of Market Participants. A key feature of these surveys is its use of a probabilistic question format to elicit the likelihood respondents assign to different future events. We discuss the advantages of using probabilistic questions, illustrate their value in more fully measuring beliefs and uncertainty, and document the pervasiveness and importance of heterogeneity in beliefs among our survey respondents."

Keywords: "[subjective] uncertainty; probabilistic survey questions; expectation formation and updating; belief heterogeneity" (search for similar items in EconPapers)
JEL-codes: C80 C83 C53 D80 (search for similar items in EconPapers)
Date: 2017
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