IDEAS home Printed from https://ideas.repec.org/p/nbp/nbpmis/140.html
   My bibliography  Save this paper

Are individual survey expectations internally consistent?

Author

Listed:
  • Maritta Paloviita

    (Bank of Finland)

  • Matti Viren

    (Bank of Finland, University of Turku)

Abstract

This paper studies professional forecasts on a micro level using three alternative data sets. The analysis is mainly based on the ECB Survey of Professional Forecasts for the euro area, but for comparison, Consensus Economics survey and the Survey of Professional Forecasts for the US are also investigated. We examine internal consistency of individual inflation and real GDP growth forecasts by estimating alternative specifications of the Phillips curve on a micro level. We also explore forecast uncertainty using two alternative measures, i.e. conventional standard deviation of individual point forecasts and the median values of individual forecasters’ uncertainty based on subjective probability distributions of survey respondents. Our analysis indicates that individual forecasters deviate systematically from each other. Moreover, inflation uncertainty is closely related to the output growth uncertainty. In forming expectations, individual forecasters seem to behave according to the hybrid specification of the New Keynesian Phillips curve. The results also indicate that inflation uncertainty has a negative impact on economic activity by increasing inflation and lowering the price sensitiveness of aggregate supply.

Suggested Citation

  • Maritta Paloviita & Matti Viren, 2013. "Are individual survey expectations internally consistent?," NBP Working Papers 140, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:140
    Note: ARE WE REALLY FORWARD-LOOKING? MEASURING AND TESTING EXPECTATIONS – CENTRAL BANK PERSPECTIVE, National Bank of Poland, 29-30 November, 2012 Warsaw
    as

    Download full text from publisher

    File URL: https://static.nbp.pl/publikacje/materialy-i-studia/140_en.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Engelberg, Joseph & Manski, Charles F. & Williams, Jared, 2009. "Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 30-41.
    2. Kortelainen, Mika & Paloviita, Maritta & Viren, Matti, 2011. "Observed inflation forecasts and the new Keynesian macro model," Economics Letters, Elsevier, vol. 112(1), pages 88-90, July.
    3. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    4. Tillmann, Peter, 2010. "The Fed's perceived Phillips curve: Evidence from individual FOMC forecasts," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1008-1013, December.
    5. Jonas Dovern & Ulrich Fritsche & Jiri Slacalek, 2012. "Disagreement Among Forecasters in G7 Countries," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1081-1096, November.
    6. Gianna Boero & Jeremy Smith & Kenneth F. Wallis, 2008. "Uncertainty and Disagreement in Economic Prediction: The Bank of England Survey of External Forecasters," Economic Journal, Royal Economic Society, vol. 118(530), pages 1107-1127, July.
    7. Fendel, Ralf & Rülke, Jan-Christoph, 2012. "Are heterogeneous FOMC forecasts consistent with the Fed’s monetary policy?," Economics Letters, Elsevier, vol. 116(1), pages 5-7.
    8. Geoff Kenny & Thomas Kostka & Federico Masera, 2014. "How Informative are the Subjective Density Forecasts of Macroeconomists?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 33(3), pages 163-185, April.
    9. Klaus Adam & Mario Padula, 2011. "Inflation Dynamics And Subjective Expectations In The United States," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 13-25, January.
    10. Carlos Bowles & Roberta Friz & Veronique Genre & Geoff Kenny & Aidan Meyler & Tuomas Rautanen, 2010. "An Evaluation of the Growth and Unemployment Forecasts in the ECB Survey of Professional Forecasters," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2010(2), pages 1-28.
    11. Céline Christensen & Peter Els & Maarten Rooij, 2006. "Dutch Households’ Perceptions of Economic Growth and Inflation," De Economist, Springer, vol. 154(2), pages 277-294, June.
    12. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    13. Dopke, Jorg & Fritsche, Ulrich, 2006. "When do forecasters disagree? An assessment of German growth and inflation forecast dispersion," International Journal of Forecasting, Elsevier, vol. 22(1), pages 125-135.
    14. Carlos Bowles & Roberta Friz & Veronique Genre & Geoff Kenny & Aidan Meyler & Tuomas Rautanen, 2007. "The ECB survey of professional forecasters (SPF) – A review after eight years’ experience," Occasional Paper Series 59, European Central Bank.
    15. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    16. Cristina Conflitti, 2012. "Measuring Uncertainty and Disagreement in the European Survey of Professional Forecasters," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2011(2), pages 69-103.
    17. Kenny, Geoff & Genre, Véronique & Bowles, Carlos & Friz, Roberta & Meyler, Aidan & Rautanen, Tuomas, 2007. "The ECB survey of professional forecasters (SPF) - A review after eight years' experience," Occasional Paper Series 59, European Central Bank.
    18. Stefan Gerlach, 2007. "Interest Rate Setting by the ECB, 1999-2006: Words and Deeds," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 1-46, September.
    19. Levi, Maurice D & Makin, John H, 1980. "Inflation Uncertainty and the Phillips Curve: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 70(5), pages 1022-1027, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeffrey C. Fuhrer, 2018. "Intrinsic expectations persistence: evidence from professional and household survey expectations," Working Papers 18-9, Federal Reserve Bank of Boston.
    2. repec:hal:spmain:info:hdl:2441/79hle3i1b69dqrocqsjarh6lb1 is not listed on IDEAS
    3. repec:spo:wpmain:info:hdl:2441/79hle3i1b69dqrocqsjarh6lb1 is not listed on IDEAS
    4. Jeffrey C. Fuhrer, 2015. "Expectations as a source of macroeconomic persistence: an exploration of firms' and households' expectation formation," Working Papers 15-5, Federal Reserve Bank of Boston.
    5. Paul Hubert & Becky Maule, 2016. "Policy and Macro Signals as Inputs to Inflation Expectation Formation," Documents de Travail de l'OFCE 2016-02, Observatoire Francais des Conjonctures Economiques (OFCE).
    6. Paul Hubert & Becky Maule, 2021. "Policy and Macro Signals from Central Bank Announcements," International Journal of Central Banking, International Journal of Central Banking, vol. 17(2), pages 255-296, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maritta Paloviita & Matti Viren, 2014. "Inflation and output growth uncertainty in individual survey expectations," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(1), pages 69-81, February.
    2. Paloviita, Maritta & Virén, Matti, 2012. "Inflation and output growth uncertainty in individual survey expectations," Bank of Finland Research Discussion Papers 37/2012, Bank of Finland.
    3. repec:zbw:bofrdp:2012_037 is not listed on IDEAS
    4. Maritta Paloviita & Matti Viren, 2014. "Inflation and output growth uncertainty in individual survey expectations," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(1), pages 69-81, February.
    5. Joshua Abel & Robert Rich & Joseph Song & Joseph Tracy, 2016. "The Measurement and Behavior of Uncertainty: Evidence from the ECB Survey of Professional Forecasters," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(3), pages 533-550, April.
    6. Paloviita, Maritta & Virén, Matti, 2014. "Analysis of forecast errors in micro-level survey data," Research Discussion Papers 8/2014, Bank of Finland.
    7. repec:zbw:bofrdp:2014_008 is not listed on IDEAS
    8. Łyziak, Tomasz & Paloviita, Maritta, 2017. "Formation of inflation expectations in turbulent times: Can ECB manage inflation expectations of professional forecasters?," Bank of Finland Research Discussion Papers 13/2017, Bank of Finland.
    9. Pilar Poncela & Eva Senra, 2017. "Measuring uncertainty and assessing its predictive power in the euro area," Empirical Economics, Springer, vol. 53(1), pages 165-182, August.
    10. Guido Schultefrankenfeld, 2020. "Appropriate monetary policy and forecast disagreement at the FOMC," Empirical Economics, Springer, vol. 58(1), pages 223-255, January.
    11. Huang, Rong & Pilbeam, Keith & Pouliot, William, 2022. "Are macroeconomic forecasters optimists or pessimists? A reassessment of survey based forecasts," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 706-724.
    12. Łyziak, Tomasz & Paloviita, Maritta, 2018. "On the formation of inflation expectations in turbulent times: The case of the euro area," Economic Modelling, Elsevier, vol. 72(C), pages 132-139.
    13. Glas, Alexander & Hartmann, Matthias, 2016. "Inflation uncertainty, disagreement and monetary policy: Evidence from the ECB Survey of Professional Forecasters," Journal of Empirical Finance, Elsevier, vol. 39(PB), pages 215-228.
    14. Maritta Paloviita and Matti Viren, 2012. "Analyzing the relationships between survey forecasts for different variables and countries," Discussion Papers 76, Aboa Centre for Economics.
    15. repec:zbw:bofrdp:2017_013 is not listed on IDEAS
    16. Manzan, Sebastiano, 2021. "Are professional forecasters Bayesian?," Journal of Economic Dynamics and Control, Elsevier, vol. 123(C).
    17. Casey, Eddie, 2021. "Are professional forecasters overconfident?," International Journal of Forecasting, Elsevier, vol. 37(2), pages 716-732.
    18. 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.
    19. Oinonen, Sami & Paloviita, Maritta, 2014. "Analysis of aggregated inflation expectations based on the ECB SPF survey," Bank of Finland Research Discussion Papers 29/2014, Bank of Finland.
    20. Oinonen, Sami & Paloviita, Maritta, 2016. "How informative are aggregated inflation expectations? Evidence from the ECB Survey of Professional Forecasters," Bank of Finland Research Discussion Papers 15/2016, Bank of Finland.
    21. Fernandes, Cecilia Melo, 2021. "ECB communication as a stabilization and coordination device: evidence from ex-ante inflation uncertainty," Working Paper Series 2582, European Central Bank.
    22. Robert W. Rich & Joseph Tracy, 2017. "The behavior of uncertainty and disagreement and their roles in economic prediction: a panel analysis," Staff Reports 808, Federal Reserve Bank of New York.
    23. Łyziak, Tomasz & Paloviita, Maritta, 2017. "Formation of inflation expectations in turbulent times : Can ECB manage inflation expectations of professional forecasters?," Research Discussion Papers 13/2017, Bank of Finland.

    More about this item

    Keywords

    Forecasting; Survey data; Expectations; Phillips curve;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbp:nbpmis:140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jakub Growiec (email available below). General contact details of provider: https://edirc.repec.org/data/nbpgvpl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.