Are Subjective Distributions in Inflation Expectations Symmetric?

University of Zurich, Department of Economics, Working Paper No. 173

17 Pages Posted: 11 Sep 2014

Date Written: August 2014

Abstract

We conducted an anonymous survey in December 2013 asking around 200 economists worldwide to provide an interval (a to b) of average inflation in the US expected "over the next two years". The respondents were also instructed to give a probability of inflation being higher or lower than the mid-interval (a+b)/2. The aggregate distribution of inflation expectations we obtain closely resembles the outcome of the Survey of Professional Forecasters for 1Q2014. More importantly, we find that the subjective probability mass on either side of the mid-interval is not statistically different from 0.5, which means that the subjective distributions are symmetric. Our results align well with several papers evaluating the Survey of Professional Forecasters or similar data sets and finding no significant departures from symmetry.

Keywords: Inflation expectations, subjective probability distributions

JEL Classification: C42, E31

Suggested Citation

Mirkov, Nikola and Steinhauer, Andreas, Are Subjective Distributions in Inflation Expectations Symmetric? (August 2014). University of Zurich, Department of Economics, Working Paper No. 173. Available at SSRN: https://ssrn.com/abstract=2494272 or http://dx.doi.org/10.2139/ssrn.2494272

Nikola Mirkov (Contact Author)

Swiss National Bank ( email )

Borsenstrasse 15
Zurich, 8022
Switzerland

Andreas Steinhauer

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

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