Direct Elicitation of Parametric Belief Distributions: An application to inflation expectations

55 Pages Posted: 4 Oct 2024 Last revised: 15 Jan 2025

See all articles by Pedro Gonzalez-Fernandez

Pedro Gonzalez-Fernandez

Maastricht University - School of Business and Economics

Ciril Bosch-Rosa

Technische Universität Berlin

Thomas Meissner

Maastricht University

Date Written: January 15, 2025

Abstract

We introduce a novel method to elicit belief distributions and apply it to elicit inflation expectations in a representative US sample through a pre-registered survey experiment. Our approach elicits beta belief distributions directly in a two-step process. First, participants specify their minimum and maximum expected inflation. They then use a graphical interface with two sliders to adjust the mean and variance of their inflation belief distribution. We benchmark our method against the  "Bins" method, popularized by the New York Fed’s Survey of Consumer Expectations (SCE). Our findings reveal significant variations in elicited belief distributions depending on the method used. Specifically, our approach yields higher mean inflation estimates and substantially reduces the standard deviations of the distributions. Respondents report that our method is easier to use and more engaging. Furthermore, the resulting distributions more accurately reflect participants' beliefs across several dimensions and show stronger correlations with their point predictions.

Keywords: Belief Elicitation, Inflation Expectations, Macroeconomic Survey

Suggested Citation

Gonzalez-Fernandez, Pedro and Bosch-Rosa, Ciril and Meissner, Thomas, Direct Elicitation of Parametric Belief Distributions: An application to inflation expectations (January 15, 2025). Available at SSRN: https://ssrn.com/abstract=4943520 or http://dx.doi.org/10.2139/ssrn.4943520

Pedro Gonzalez-Fernandez (Contact Author)

Maastricht University - School of Business and Economics ( email )

Netherlands

Ciril Bosch-Rosa

Technische Universität Berlin ( email )

Straße des 17. Juni 135,
Fakultat VII, Sekretariat H52
Berlin, 10623
Germany

Thomas Meissner

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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