Understanding Survey Based Inflation Expectations
No 2017-046, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)
Survey based measures of inflation expectations are not informationally efficient yet carry important information about future inflation. This paper explores the economic significance of informational inefficiencies of survey expectations. A model selection algorithm is applied to the inflation expectations of households and professionals using a large panel of macroeconomic data. The expectations of professionals are best described by different indicators than the expectations of households. A forecast experiment finds that it is difficult to exploit informational inefficiencies to improve inflation forecasts, suggesting that the economic cost of the surveys' deviation from rationality is not large.
Keywords: Informational efficiency; Phillips curve; Survey based inflation expectations; Boosting; Inflation forecasting; Machine learning (search for similar items in EconPapers)
JEL-codes: C53 E31 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
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Journal Article: Understanding survey-based inflation expectations (2018)
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