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Quantifying subjective oncertainty in survey expectations

Fabian Krüger and Lora Pavlova

No 664, Working Papers from University of Heidelberg, Department of Economics

Abstract: Several recent surveys ask for a person's subjective probabilities that the inflation rate falls into various outcome ranges. We provide a new measure of the uncertainty implicit in such probabilities. The measure has several advantages over existing methods: It is trivial to implement, requires no functional form assumptions, and is well-defined for all logically possible probabilities. From a theoretical viewpoint, the measure can be motivated as the entropy function of a strictly proper scoring rule. We demonstrate the measure's good performance in a simulation study based on empirical data from the Survey of Consumer Expectations.

Keywords: uncertainty; inflation; economic expectations; probabilistic forecasting (search for similar items in EconPapers)
Date: 2019-06-03
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Working Paper: Quantifying subjective uncertainty in survey expectations (2020) Downloads
Working Paper: Quantifying Subjective Uncertainty in Survey Expectations (2020) Downloads
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