Forecasting euro area inflation using a huge panel of survey expectations

Florian Huber*, Luca Onorante, Michael Pfarrhofer

*Corresponding author for this work

Publication: Scientific journalJournal articlepeer-review

Abstract

In this paper, we forecast euro area inflation and its main components using a massive number of time series on survey expectations obtained from the European Commission’s Business and Consumer Survey. To make the estimation of such a huge model tractable, we use recent advances in computational statistics to carry out posterior simulation and inference. Our findings suggest that including a wide range of firms’ and consumers’ opinions about future economic developments offers useful information to forecast prices and assess tail risks to inflation. These predictive improvements arise from surveys related to expected inflation and other questions related to the general economic environment. Finally, we find that firms’ expectations about the future seem to have more predictive content than consumer expectations.
Original languageEnglish
JournalInternational Journal of Forecasting
DOIs
Publication statusE-pub ahead of print - 9 Oct 2023

Cite this