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Inflation Expectations: The Effect of Question Ordering on Forecast Inconsistencies

Maxime Phillot and Rina Rosenblatt-Wisch ()

No 2018-11, Working Papers from Swiss National Bank

Abstract: Expectations are key in modern macroeconomics. However, due to their scant measurability, policymakers often rely on survey data. It is thus of critical importance to know the limits of survey data use. We look at inflation expectations as measured through the Deloitte CFO Survey Switzerland and respondents' sensitivity to question ordering thereof. In particular, we investigate whether forecast inconsistencies - the discrepancies between point forecasts and measures of central tendency derived from density forecasts - change significantly depending on whether the point forecast or the density forecast is asked first. We find that a) forecast inconsistencies are sizeable in the data and b) question ordering matters. Specifically, both parametric and non-parametric evaluations of consistency show that c) point forecasts tend to be significantly higher than density forecasts only for those respondents who give a density forecast first. In addition, d) characteristics such as uncertainty, firm size and economic sector relate to inconsistencies.

Keywords: Question effects; question ordering; inflation expectations; consistency of forecasts; point forecast; density forecast (search for similar items in EconPapers)
JEL-codes: E31 E37 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for, nep-mac and nep-mon
Date: 2018
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