Understanding Survey Based Inflation Expectations

38 Pages Posted: 18 Apr 2017

See all articles by Travis J. Berge

Travis J. Berge

Board of Governors of the Federal Reserve System

Date Written: 2017-04


Survey based measures of inflation expectations are not informationally efficient yet carry important information about future inflation. This paper explores the economic significance of informational inefficiencies of survey expectations. A model selection algorithm is applied to the inflation expectations of households and professionals using a large panel of macroeconomic data. The expectations of professionals are best described by different indicators than the expectations of households. A forecast experiment finds that it is difficult to exploit informational inefficiencies to improve inflation forecasts, suggesting that the economic cost of the surveys' deviation from rationality is not large.

Keywords: Informational efficiency, Phillips curve, Survey based inflation expectations, Boosting, Inflation forecasting, Machine learning

JEL Classification: C53, E31, E37

Suggested Citation

Berge, Travis J., Understanding Survey Based Inflation Expectations (2017-04). FEDS Working Paper No. 2017-046, Available at SSRN: https://ssrn.com/abstract=2953563 or http://dx.doi.org/10.17016/FEDS.2017.046

Travis J. Berge (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
United States

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