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Konjunkturinstitutet - National Institute of Economic Research Working Papers, Konjunkturinstitutet - National Institute of Economic Research

No 114:
The Properties of Survey-Based Inflation Expectations in Sweden

Thomas Jonsson () and Pär Österholm ()

Abstract: This paper assesses the properties of survey-based inflation expectations in Sweden. The survey is conducted by Prospera once every quarter and consists of respondents from businesses and labour-market organisa-tions. The paper shows that inflation expectations measured in this sur-vey tend to be biased and inefficient forecasts of future inflation. Results also indicate that long-run inflation expectations are overly adaptive with respect to actual inflation. Finally, evaluations of forecast accuracy show that these inflation expectations are worse predictors of inflation than those of a professional forecasting institution and also typically outper-formed by a simple autoregressive model. Overall, our results indicate that economic agents’ expectations formation process is suboptimal and/or the survey fails to capture the true inflation expectations.

Keywords: Survey data; Inflation targeting; (follow links to similar papers)

JEL-Codes: E52; (follow links to similar papers)

31 pages, December 1, 2009

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