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Survey vs ARCH Measures of Inflation Uncertainty

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  • Batchelor, Roy
  • Dua, Pami

Abstract

This paper evaluates estimates of the variance of U.S. inflation based on popular conditional heteroscedasticity (ARCH) models, by comparing them with the variances of subjective probability distributions for inflation provided in the ASA-NBER surveys of U.S. economic forecasters. The results are not encouraging for the ARCH model. Except in the early 1950s, ARCH effects in U.S. inflation are weak; there are no significant correlations between the ARCH and survey estimates of inflation uncertainty; and the ARCH measures give a misleading picture of the causes of inflation uncertainty and its effects on interest rates. Copyright 1993 by Blackwell Publishing Ltd

Suggested Citation

  • Batchelor, Roy & Dua, Pami, 1993. "Survey vs ARCH Measures of Inflation Uncertainty," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 341-353, August.
    • Handle: RePEc:bla:obuest:v:55:y:1993:i:3:p:341-53
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    Cited by:

    1. Constantin Burgi, 2016. "What Do We Lose When We Average Expectations?," Working Papers 2016-013, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    2. da Silva Filho, Tito Nícias Teixeira, 2005. "Is there too much certainty when measuring uncertainty," MPRA Paper 16383, University Library of Munich, Germany.
    3. Kajal Lahiri & Xuguang Sheng, 2010. "Measuring forecast uncertainty by disagreement: The missing link," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 514-538.
    4. Mailand, Wilhelm, 1998. "Zum Einfluß von Unsicherheit auf die gesamtwirtschaftliche Investitionstätigkeit," HWWA Discussion Papers 57, Hamburg Institute of International Economics (HWWA).
    5. Fushang Liu & Kajal Lahiri, 2006. "Modelling multi-period inflation uncertainty using a panel of density forecasts," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(8), pages 1199-1219.
    6. Christian Grimme & Steffen Henzel & Elisabeth Wieland, 2014. "Inflation uncertainty revisited: a proposal for robust measurement," Empirical Economics, Springer, vol. 47(4), pages 1497-1523, December.
    7. Constantin Bürgi & Tara M. Sinclair, 2021. "What does forecaster disagreement tell us about the state of the economy?," Applied Economics Letters, Taylor & Francis Journals, vol. 28(1), pages 49-53, January.
    8. John Thornton, 2007. "The Relationship between Inflation and Inflation Uncertainty in Emerging Market Economies," Southern Economic Journal, John Wiley & Sons, vol. 73(4), pages 858-870, April.
    9. Jagjit S. Chadha & Lucio Sarno, 2002. "Short‐ and long‐run price level uncertainty under different monetary policy regimes: an international comparison," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(3), pages 183-212, July.
    10. Mailand, Wilhelm, 1998. "Zum Einfluss von Unsicherheit auf die gesamtwirtschaftliche Investitionstatigkeit," Discussion Paper Series 26305, Hamburg Institute of International Economics.

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