Working Papers,
Örebro University, School of Business

Abstract: In this paper, we investigate whether survey measures of inflation expec-tations in Sweden Granger cause Swedish CPI-inflation. This is done by studying the precision of out-of-sample forecasts from Bayesian VAR models using a sample of quarterly data from 1996 to 2016. It is found that the inclusion of inflation expectations in the models tends to improve forecast precision. However, the improvement is typically small enough that it could be described as economically irrelevant. One exception can possibly be found in the expectations of businesses in the National Insti-tute of Economic Research’s Economic Tendency Survey; when included in the models, these improve forecast precision in a meaningful way at short horizons. Taken together, it seems that the inflation expectations studied here do not provide a silver bullet for those who try to improve VAR-based forecasts of Swedish inflation. The largest benefits from using these survey expectations may instead perhaps be found among analysts and policy makers; they can after all provide relevant information concerning, for example, the credibility of the inflation target or challenges that the central bank might face when conducting monetary policy.

Keywords: Bayesian VAR; Granger causality; Out-of-sample forecasts

JEL-codes: C32; F43

25 pages, October 3, 2016

Full text files

wp-4-2016.pdf  

Download statistics

• Örebro University, School of Business
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:oruesi:2016_004This page generated on 2024-09-13 22:16:32.