Guzman, Giselle C. (2011): The case for higher frequency inflation expectations.
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Abstract
I present evidence that higher frequency measures of inflation expectations outperform lower frequency measures of inflation expectations in tests of accuracy, predictive power, and rationality. For decades, the academic literature has focused on three survey measures of expected inflation: the Livingston Survey, the Survey of Professional Forecasters, and the Michigan Surveys of Consumers. While these measures have been useful in developing models of forecasting inflation, the data are low frequency measures that are anachronistic in the modern era of high frequency and realtime data. I present a collection of 37 different measures of inflation expectations, including many previously unexploited monthly and realtime measures of inflation expectations. These higher frequency measures tend to outperform the standard three low frequency survey measures in tests of accuracy, predictive power, and rationality, indicating that there are benefits to using higher frequency measures of inflation expectations. Out of sample forecasts confirm the findings.
Item Type:  MPRA Paper 

Original Title:  The case for higher frequency inflation expectations 
Language:  English 
Keywords:  inflation; expectations; sentiment; TIPS; surveys; forecasting; Michigan; SPF; Livingston; timeseries; econometrics; inflation; predictive power; outofsample forecasts; high frequency; Rational Expectations Hypothesis; Efficient Markets Hypothesis; hypothesis testing; inflation forecasting 
Subjects:  C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C51  Model Construction and Estimation C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C52  Model Evaluation, Validation, and Selection C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C12  Hypothesis Testing: General G  Financial Economics > G0  General > G00  General E  Macroeconomics and Monetary Economics > E4  Money and Interest Rates > E47  Forecasting and Simulation: Models and Applications D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D84  Expectations ; Speculations E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E58  Central Banks and Their Policies E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E30  General C  Mathematical and Quantitative Methods > C0  General > C02  Mathematical Methods G  Financial Economics > G1  General Financial Markets > G14  Information and Market Efficiency ; Event Studies ; Insider Trading C  Mathematical and Quantitative Methods > C8  Data Collection and Data Estimation Methodology ; Computer Programs > C82  Methodology for Collecting, Estimating, and Organizing Macroeconomic Data ; Data Access E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E31  Price Level ; Inflation ; Deflation E  Macroeconomics and Monetary Economics > E4  Money and Interest Rates > E44  Financial Markets and the Macroeconomy C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models ; Multiple Variables > C32  TimeSeries Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C13  Estimation: General D  Microeconomics > D0  General > D03  Behavioral Microeconomics: Underlying Principles C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C53  Forecasting and Prediction Methods ; Simulation Methods C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C20  General C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C22  TimeSeries Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ?? C42 ?? D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D83  Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness C  Mathematical and Quantitative Methods > C8  Data Collection and Data Estimation Methodology ; Computer Programs > C81  Methodology for Collecting, Estimating, and Organizing Microeconomic Data ; Data Access G  Financial Economics > G1  General Financial Markets > G10  General E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E37  Forecasting and Simulation: Models and Applications C  Mathematical and Quantitative Methods > C0  General > C01  Econometrics 
Item ID:  36656 
Depositing User:  Giselle Guzman 
Date Deposited:  22. Feb 2012 03:08 
Last Modified:  08. Sep 2015 19:28 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/36656 
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