The information content of market-based measures for the long-term inflation expectations of professionals: evidence from a midas analysis |
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Authors: | Ahmed Hanoma |
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Affiliation: | 1. Department of Economics, Freie Universit?t Berlin, Berlin, Germany;2. Department of Economics, Cairo University, Giza, Egypt |
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Abstract: | Long-term inflation expectations taken from the Survey of Professional Forecasters are a major source of information for monetary policy. Unfortunately, they are published only on a quarterly basis. This article investigates the daily information content of market-based measures, such as inflation-linked swaps and breakeven inflation rates, for the next survey outcome. Using a mixed data sampling approach, we find that professionals account for the daily dynamics of market-based measures when they submit their long-term inflation expectations. We propose a daily indicator of professionals’ inflation expectations that outperforms alternative indicators that ignore the high-frequency dynamics of market-based measures. To illustrate the usefulness of the new indicator, we provide new evidence on the (re-)anchoring of U.S. inflation expectations. |
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Keywords: | Inflation expectations dynamics inflation expectations anchoring MIDAS |
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