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The information content of market-based measures for the long-term inflation expectations of professionals: evidence from a midas analysis

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  • Ahmed Hanoma
  • Dieter Nautz

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 article investigates the daily information content of market-based measures, such as inflation-linked swaps and breakeven inflation rates, for the next survey outcome. Using a mixed data sampling approach, we find that professionals account for the daily dynamics of market-based measures 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 market-based measures. To illustrate the usefulness of the new indicator, we provide new evidence on the (re-)anchoring of U.S. inflation expectations.

Suggested Citation

  • Ahmed Hanoma & Dieter Nautz, 2019. "The information content of market-based measures for the long-term inflation expectations of professionals: evidence from a midas analysis," Applied Economics, Taylor & Francis Journals, vol. 51(51), pages 5623-5636, November.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:51:p:5623-5636
    DOI: 10.1080/00036846.2019.1616071
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    Cited by:

    1. Ding, Shusheng & Zheng, Dandan & Cui, Tianxiang & Du, Min, 2023. "The oil price-inflation nexus: The exchange rate pass- through effect," Energy Economics, Elsevier, vol. 125(C).
    2. Baumann, Ursel & Darracq Pariès, Matthieu & Westermann, Thomas & Riggi, Marianna & Bobeica, Elena & Meyler, Aidan & Böninghausen, Benjamin & Fritzer, Friedrich & Trezzi, Riccardo & Jonckheere, Jana & , 2021. "Inflation expectations and their role in Eurosystem forecasting," Occasional Paper Series 264, European Central Bank.

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