Tomasz Łyziak
Probabilistic methods of measuring individual inflation expectations on the basis of survey data

Probabilistic methods of quantifying of inflation expectations, adjusted to survey questions, where respondents not only declare the expected direction of movement in the general price level, but also express qualitative opinions as to its strength, require the adoption of two types of assumptions. The first of these is specifying the type of distribution that describes the expected rate of price changes of the tested population. The other one consists of adopting the measure of perception for the current price dynamics to which respondents refer to when answering survey questions on their inflation expectations.

The article presents the results of two versions of the corrected Carlson Parkin probability method (1975), applied in the analysis of inflation expectations of individuals in Poland. It is assumed in both procedures that the expected price growth rate is characterised with a normal distribution during the course of next year. However, different assumptions are made regarding the perception of current inflation. In the first method, which leads to achieving an objectified measure of inflation expectations, it is assumed that the perception of price movements in the period preceding the survey is convergent with the official inflation rate, i.e. known as the Harmonised Index of Consumer Prices, at the time of conducting the survey. The second method refers to subjective factors of perception of current price dynamics, obtained on the basis of a separate survey question and leads to determining a subjective measure of inflation expectations of individuals.



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