Inflation expectations in Spain: The Spanish PwC Survey

María del Carmen Ramos-Herrera () and Simon Sosvilla-Rivero
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María del Carmen Ramos-Herrera: Universidad Complutense de Madrid. Instituto Complutense de Estudios Internacionales (ICEI)
Authors registered in the RePEc Author Service: Maria del Carmen Ramos Herrera ()

No 2013-08, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: We examine the predictive ability, the consistency properties and the possible driving forces of inflation expectations, using a survey conducted in Spain by PwC among a panel of experts and entrepreneurs. When analysing the headline inflation rate, our results suggest that the PwC panel has some forecasting ability for time horizons from 3 to 9, improving when it comes to predict the core inflation rate. Nevertheless, the results indicate that predictions made by survey participants are neither unbiased nor efficient predictors of future inflation rates, regardless of the measures of inflation used. As for the consistency properties of the inflation expectations formation process, we find that panel members form stabilising expectations in the case of the headline inflation rate, both in the short and in the long-run, although in the case of the core inflation rate, consistency remains indeterminate. Finally, we find that inflation expectations are very persistent and that they appear to incorporate the information content of some macroeconomic variables (current core inflation and growth rate, the USD/EUR exchange rate, the ECB inflation target and changes in the ECB official short-term interest rate).

Keywords: Inflation; Forecasting; Expectations; Panel data; Econometric models. (search for similar items in EconPapers)
JEL-codes: C33 D84 E31 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2013-01
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
Note: The authors wish to thank PricewaterhouseCoopers in Spain for kindly providing us with the data set. Financial support by the Spanish Ministry of Science and Innovation (ECO2011-23189) is also gratefully acknowledged. María del Carmen Ramos-Herrera also acknowledges her grant (F.P.U.) from the Spanish Ministry of Science and Innovation (Ref. AP2008-004015). Corresponding author: María del Carmen Ramos-Herrera: madelram@ccee.ucm.es.
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Journal Article: Inflation expectations in Spain: The Spanish PwC Survey (2013)
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