Forward-looking component in consumers’ expectations and inflation forecast targeting: the case of six European economies
Magdalena Szyszko , Aleksandra Rutkowska
AbstractSince there are different ways of revealing central banks’ intentions, a simple research question, which we address in this study, arises. Is the forward-looking (FL) component of consumers’ expectations related to the way in which the forecast is revealed and used by central banks? The research covers six countries: The Czech Republic, Hungary, Romania, Poland, Sweden, and the UK, over the period of 2001-2016. Our methodology consists of the quantification of expectations, tests for rationality of expectations, estimation of the degree of their FL, the index-based assessment of central banks’ forecasting transparency and importance of forecasts in monetary policy, as well as correlation examination of forward-lookingness of monetary policy and expectation errors. Based on the completed research, we link the results of the FL analysis to the index-based assessment of inflation forecasts targeting. The results are varied. The highest degree of expectations’ FL is found for the UK and Sweden. Czech consumers’ expectations are less FL, whereas central banks’ involvement in inflation forecast targeting is comparable to the Swedish case. For two countries we found no forward-looking component in consumers’ expectations. The study makes a valid contribution to the existing literature as it presents a novel approach to analysing the relation between forecasts and inflation forecast targeting and expectations.
|Journal series||Zbornik Radova Ekonomskog Fakulteta u Rijeci-Proceedings of Rijeka Facultyof Economics, [Zbornik Radova Ekonomskog Fakultet au Rijeci], ISSN 1331-8004, e-ISSN 1846-7520, (N/A 20 pkt)|
|Publication size in sheets||1.75|
|Keywords in Polish||prognozy inflacji, celowanie w prognozę inflacji, oczekiwania inflacyjne konsumentów|
|Keywords in English||inflation forecast, inflation forecast targeting, consumers’ expectations, forward-lookingness of expectations|
|ASJC Classification||; ;|
|Score||= 20.0, 20-04-2020, ArticleFromJournal|
|Publication indicators||= 0; : 2018 = 0.693; : 2017 = 0.455 (2) - 2017=0.514 (5)|
* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.