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June 2017 issue
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Winkelried
Davis, Simpson Prescott
Segal
Kohlscheen, Avalos, Schrimpf
Arai
Del Giovane, Nobili, Signoretti
Schechtman
Blanchard
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Inferring Inflation Expectations from Fixed-Event Forecasts

by Diego Winkelried
Universidad del Pacífico (Lima, Perú)

Abstract

Often, expected inflation measured by surveys is available only as fixed-event forecasts. Even though these surveys do contain information of a complete term structure of expectations, direct inferences about them are troublesome. Records of fixed-event forecasts through time are associated with timevarying forecast horizons, and there is no straightforward way to interpolate such figures. This paper proposes an adaptation of the measurement model of Kozicki and Tinsley (2012) to suit the intricacies of fixed-event data. Using the Latin American Consensus Forecasts, the model is estimated to study the behavior of inflation expectations in four inflation targeters (Chile, Colombia, Mexico, and Peru). For these countries, the results suggest that the announcement of credible inflation targets has been instrumental in anchoring long-run expectations.

JEL Codes: C32, E37, E52.

 
Full article (PDF, 31 pages, 921 kb)