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Evaluating Density Forecasts of Inflation: The Survey of Professional Forecasters

Francis Diebold (), Anthony S Tay () and Kenneth Wallis ()

No 6228, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Since 1968, the Survey of Professional Forecasters has asked respondents to provide a" complete probability distribution of expected future inflation. We evaluate the adequacy of" those density forecasts using the framework of Diebold, Gunther and Tay (1997). The analysis" reveals several interesting features of the density forecasts in relation to realized inflation including several deficiencies of the forecasts. The probability of a large negative inflation" shock is generally overestimated, and in more recent years the probability of a large shock of" either sign is overestimated. Inflation surprises are serially correlated eventually adapt. Expectations of low inflation are associated with reduced uncertainty. The" results suggest several promising directions for future research.

JEL-codes: E3 C1 (search for similar items in EconPapers)
Date: 1997-10
Note: EFG
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Published as Cointegration, Causality and Forecasting: A Festschrift in Honor of Clive W. J. Granger, 76-90, Engleand, R. and H. Whie, eds., Oxford: Oxford University Press, 1999.

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Working Paper: Evaluating Density Forecasts of Inflation: The Survey of Professional Forecasters (1998)
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