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The information content of inflation swap rates for the long-term inflation expectations of professionals: Evidence from a MIDAS analysis

Ahmed Hanoma and Dieter Nautz ()

No 2018/16, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: Long-term inflation expectations taken from the Survey of Professional Forecasters are a major source of information for monetary policy. Unfortunately, they are published only on a quarterly basis. This paper investigates the daily information content of inflation-linked swap rates for the next survey outcome. Using a mixed data sampling approach, we find that professionals account for the daily dynamics of inflation swap rates when they submit their long-term inflation expectations. We propose a daily indicator of professionals' inflation expectations that outperforms alternative indicators that ignore the high-frequency dynamics of inflation swap rates. To illustrate the usefulness of the new indicator, we provide new evidence on the (re-)anchoring of U.S. inflation expectations.

Keywords: Inflation Expectations Dynamics; Expectations Anchoring; MIDAS (search for similar items in EconPapers)
JEL-codes: E31 E52 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-mac and nep-mon
Date: 2018
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