Do professionals’ inflation forecasts incorporate the beliefs of others? A functional data approach

Clements, M. ORCID: https://orcid.org/0000-0001-6329-1341 and Wang, S. ORCID: https://orcid.org/0000-0003-2113-5521 (2026) Do professionals’ inflation forecasts incorporate the beliefs of others? A functional data approach. International Journal of Forecasting. ISSN 0169-2070 (In Press)

Abstract/Summary

We apply functional data analysis to survey expectations data, and show that functional principal component analysis combined with functional regression analysis is a fruitful way of capturing the effects of others’ forecasts on a respondent’s inflation forecasts. We estimate forward-looking Phillips curves on each respondent’s inflation and unemployment rate forecasts, and show that for nearly a half of the respondents the forecasts of others are important. The functional principal components of the cross-sectional distributions of forecasts are shown to capture characteristics other than the mean or consensus forecast, and include forecaster disagreement.

Item Type	Article
URI	https://centaur.reading.ac.uk/id/eprint/130040
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
Publisher	Elsevier
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