Quantifying Survey Expectations: A Critical Review and Generalization of the Carlson-Parkin Method

33 Pages Posted: 27 Nov 2013

See all articles by Kajal Lahiri

Kajal Lahiri

State University of New York (SUNY) at Albany, College of Arts and Sciences, Economics

Yongchen Zhao

Towson University - Department of Economics

Date Written: November 13, 2013

Abstract

This paper provides a critical review of the popular Carlson-Parkin (CP) quantification method using household-level data from the University of Michigan’s Survey of Consumers. We find strong evidence against the threshold constancy, symmetry, homogeneity, and the overall unbiasedness assumptions of the CP method. To address these violations, we generalize the CP method using a hierarchical ordered probit (HOPIT) model. By comparing the quantified inflation expectations with quantitative expectations queried directly from the same set of households, we show that the generalized model performs better than the CP method. In particular, when the CP unbiasedness assumption is replaced by a time-varying calibration, the resulting quantified series is found to track the quantitative benchmark well, over a very diverse time period.

Keywords: HOPIT model, household survey data, quantification, inflation expectation

JEL Classification: C25, C43, D84, E31

Suggested Citation

Lahiri, Kajal and Zhao, Yongchen, Quantifying Survey Expectations: A Critical Review and Generalization of the Carlson-Parkin Method (November 13, 2013). Available at SSRN: https://ssrn.com/abstract=2359500 or http://dx.doi.org/10.2139/ssrn.2359500

Kajal Lahiri

State University of New York (SUNY) at Albany, College of Arts and Sciences, Economics ( email )

Department of Economics
1400 Washington Avenue
Albany, NY 12222
United States
518-442 4758 (Phone)
518-442 4736 (Fax)

HOME PAGE: http://www.albany.edu/~klahiri

Yongchen Zhao (Contact Author)

Towson University - Department of Economics ( email )

Towson, MD 21204
United States

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