Do inflation expectations improve model-based inflation forecasts in russian economy?

Помогают ли инфляционные ожидания прогнозировать инфляцию в российской экономике?

Perevyshin, Yuriy (Перевышин, Юрий) () and Kolyadenko, Pavel (Коляденко, Павел) ()
Additional contact information
Perevyshin, Yuriy (Перевышин, Юрий): The Russian Presidential Academy of National Economy and Public Administration
Kolyadenko, Pavel (Коляденко, Павел): The Russian Presidential Academy of National Economy and Public Administration

Working Papers from Russian Presidential Academy of National Economy and Public Administration

Abstract: The paper shows that the use of inflation expectations from surveys of Russian companies, households and professional forecasters does not lead to a significant improvement in the accuracy of the inflation forecast in factor models based on the Phillips curve over the past 5 years. For some forecasting horizons expectations of certain economic agents can lead to an increase in the accuracy of the forecast, but not by more than 10%. There is an improvement in the inflation forecast in the medium-term horizon from 1 to 2 years, with the addition of inflation expectations of analysts or companies. Iterative forecasting of inflation within the Phillips curve turns out to be more accurate than constructing a direct forecast or forecast based on a vector autoregression model, as well as a random walk model. Based on the estimated VAR model, the impulse response function of inflation to the shocks of inflation expectations indicates that short-term expectations of companies and households have the greatest impact on the dynamics of inflation in Russia on the horizon for at least 2 quarters. The Bank of Russia should conduct its communication policy to stabilize the expectations of companies and households. Also we find that the inflation forecasts of the Bank of Russia affect the inflation expectations of professional forecasters on the horizon up to 2 years. The use of long-term expectations of the consensus forecast of analysts as trend inflation leads to an increase in the accuracy of the inflation forecast in factor models.

Keywords: inflation forecasting; inflation; inflation expectations; Phillips curve; monetary policy; communication policy; trend inflation; forecasting in gaps (search for similar items in EconPapers)
JEL-codes: C53 D84 E31 E37 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://repec.ranepa.ru/rnp/wpaper/w202333.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rnp:wpaper:w202333

Access Statistics for this paper

More papers in Working Papers from Russian Presidential Academy of National Economy and Public Administration Contact information at EDIRC.
Bibliographic data for series maintained by RANEPA maintainer ().