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Inflation Forecasts: Are Market-Based and Survey-Based Measures Informative?

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  • Magdalena Grothe
  • Aidan Meyler

Abstract

This paper analyses the predictive power of market-based and survey-based inflation expectations for actual inflation. We use the data on inflation swaps and the forecasts from the Survey of Professional Forecasters for the euro area and the United States. The results show that both market-based and survey-based measures have a non-negligible predictive power for inflation developments, as compared to statistical benchmark models. Therefore, for horizons of one and two years ahead, market-based and survey-based inflation expectations actually convey information on future inflation developments.

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  • Magdalena Grothe & Aidan Meyler, 2018. "Inflation Forecasts: Are Market-Based and Survey-Based Measures Informative?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(1), pages 171-188, January.
    • Handle: RePEc:jfr:ijfr11:v:9:y:2018:i:1:p:171-188
    DOI: 10.5430/ijfr.v9n1p171
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    More about this item

    Keywords

    inflation; expectations; forecasting; swaps; surveys; market; professional forecasters Journal: International Journal of Financial Research;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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