ESRI Discussion Paper Series No.236
Measuring Inflation Expectations Using Interval-Coded Data

Yasutomo Murasawa
Professor, School of Economics,Osaka Prefecture University

Abstract

To quantify qualitative survey data, the Carlson-Parkin method assumes normality, a time-invariant symmetric indifference interval, and long-run unbiased expectations. Interval-coded data do not require these assumptions. Since April 2004, the Monthly Consumer Confidence Survey in Japan asks households their price expectations a year ahead in seven categories with partially known boundaries; thus one can identify up to six parameters including an indifference interval each month. This paper compares normal, skew normal, and skew t distributions, and finds that the skew t distribution fits the best throughout the period studied. The results help to understand the dynamics of heterogeneous expectations.


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  2. page1
    Abstract
  3. page2
    1. INTRODUCTION
  4. page5
    2. SKEW NORMAL AND SKEW t DISTRI-BUTIONS
    1. page5
      2.1. Skew Normal Distribution
    2. page6
      2.2. Skew t Distribution
  5. page7
    3. Skew t Distribution
  6. page8
    4. INTERVAL REGRESSION
  7. page9
    5. APPLICATION
    1. page9
      5.1. Data
    2. page12
      5.2. Parameter Estimates
    3. page15
      5.3. Model Selection
    4. page17
      5.4. Inflation Expectations
  8. page24
    6. DISCUSSION
  9. page25
    ACKNOWLEDGMENTS
  10. page25
    References
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