Measuring Inflation Expectations Using Interval‐Coded Data

22 Pages Posted: 3 Jul 2013

Date Written: August 2013

Abstract

To quantify qualitative survey data, the Carlson–Parkin method assumes normality, a time‐invariant symmetric indifference interval, and long‐run unbiased expectations. These assumptions are unnecessary for interval‐coded data. In April 2004, the Monthly Consumer Confidence Survey in Japan started to ask households about their price expectations a year ahead in seven categories with partially known boundaries. Thus one can identify up to six parameters including an indifference interval each month. This paper compares normal, skew normal (SN), skew exponential power (SEP), and skew t (St) distributions, and finds that an St distribution fits the data well. The results help us to better understand the dynamics of heterogeneous expectations.

JEL Classification: C25, C46, C82, E31

Suggested Citation

Murasawa, Yasutomo, Measuring Inflation Expectations Using Interval‐Coded Data (August 2013). Oxford Bulletin of Economics and Statistics, Vol. 75, Issue 4, pp. 602-623, 2013, Available at SSRN: https://ssrn.com/abstract=2289079 or http://dx.doi.org/10.1111/j.1468-0084.2012.00704.x

Yasutomo Murasawa (Contact Author)

Konan University ( email )

8-9-1 Okamoto Higashinadaku
Kobe 658-8501
Japan

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