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

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  • Hanoma, Ahmed
  • Nautz, Dieter

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.

Suggested Citation

  • Hanoma, Ahmed & Nautz, Dieter, 2018. "The information content of inflation swap rates for the long-term inflation expectations of professionals: Evidence from a MIDAS analysis," Discussion Papers 2018/16, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:201816
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    More about this item

    Keywords

    Inflation Expectations Dynamics; Expectations Anchoring; MIDAS;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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