Survey measures of inflation expectations in Poland: are they relevant from the macroeconomic perspective?. Issue 1 (2nd January 2016)

• Record Type: Journal Article
• Authors: Łyziak, Tomasz
• Is Part Of: Baltic journal of economics. Volume 16:Issue 1(2016)
• Page Start: 33
• Page End: 52
• Publication Date: 2016-01-02
• Subjects: Inflation expectations -- survey -- New Keynesian model -- monetary transmission mechanism -- Poland; C54 -- D84 -- E17 -- E43; Economics -- Baltic States -- Periodicals; Economics -- Europe, Eastern -- Periodicals; Baltic States -- Economic policy -- Periodicals; Europe, Eastern -- Economic policy -- Periodicals; Baltic States -- Economic conditions -- Periodicals; Europe, Eastern -- Economic conditions -- Periodicals; Periodicals; 330.947
• DOI: 10.1080/1406099X.2016.1165402
• Languages: English
• ISSNs: 1406-099X

Abstract

ABSTRACT: This paper estimates different versions of the stylized New Keynesian model of the Polish economy, in which alternative measures of inflation expectations are used, that is, model-consistent (rational) expectations and survey-based expectations of consumers, enterprises and financial sector analysts. To compare dynamic properties of the models, we analyse propagation of the interest rate impulse, exchange rate impulse and a permanent change of inflation target. Differences in impulse responses pose the question which model should be treated as the most adequate. Analysis of in-sample inflation forecasting errors suggests that the model with rational expectations displays the lowest forecasting accuracy, while the model using expectations of enterprises is the best-performing model. In more general terms, our analysis suggests the best way of exploiting survey data on inflation expectations is not by using them as separate forward-looking information, alternative to macroeconomic models, but by combining both types of information.