Inflation Expectations in Spain: The Spanish PwC Survey

14 Pages Posted: 2 Feb 2013

See all articles by María del Carmen Ramos-Herrera

María del Carmen Ramos-Herrera

Universidad Complutense de Madrid (UCM)

Simon Sosvilla-Rivero

UCM Institute for Economic Analysis

Date Written: January 31, 2013

Abstract

We examine the predictive ability, the consistency properties and the possible driving forces of inflation expectations, using a survey conducted in Spain by PwC among a panel of experts and entrepreneurs. When analysing the headline inflation rate, our results suggest that the PwC panel has some forecasting ability for time horizons from 3 to 9, improving when it comes to predict the core inflation rate. Nevertheless, the results indicate that predictions made by survey participants are neither unbiased nor efficient predictors of future inflation rates, regardless of the measures of inflation used. As for the consistency properties of the inflation expectations formation process, we find that panel members form stabilising expectations in the case of the headline inflation rate, both in the short and in the long-run, although in the case of the core inflation rate, consistency remains indeterminate. Finally, we find that inflation expectations are very persistent and that they appear to incorporate the information content of some macroeconomic variables (current core inflation and growth rate, the USD/EUR exchange rate, the ECB inflation target and changes in the ECB official short-term interest rate).

Keywords: inflation, forecasting, expectations, panel data, econometric models

JEL Classification: E31, D84, C33

Suggested Citation

Ramos-Herrera, María del Carmen and Sosvilla-Rivero, Simon, Inflation Expectations in Spain: The Spanish PwC Survey (January 31, 2013). Available at SSRN: https://ssrn.com/abstract=2210310 or http://dx.doi.org/10.2139/ssrn.2210310

María del Carmen Ramos-Herrera

Universidad Complutense de Madrid (UCM) ( email )

Carretera de Humera s/n
Madrid, Madrid 28223
Spain

Simon Sosvilla-Rivero (Contact Author)

UCM Institute for Economic Analysis ( email )

Carretera de Humera s/n
Madrid, Madrid 28223
Spain
+34913932626 (Phone)

HOME PAGE: http://www.ucm.es/info/ecocuan/ssr/

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