Essays on Economic Policy (ESPE in Spanish) - What do Surveys Tell us About the Formation of Inflation Expectations?
En la revista Ensayos sobre Política Económica (ESPE) divulgamos los resultados y las propuestas de política que surgen de investigaciones académicas realizadas en el Banco de la República. Cuando nos lea, tenga siempre presente que el contenido de nuestros artículos, así como los análisis y conclusiones que de ellos se derivan, son exclusiva responsabilidad de sus autores. El material divulgado en nuestra revista ESPE no compromete ni representa la opinión del Banco de la República ni la de su Junta Directiva.
In the journal Ensayos sobre Política Económica - ESPE - we disclose the results and policy proposals that arise from academic research carried out at the Banco de la República. When you read us, always keep in mind that the content of our articles, as well as the analyzes and conclusions derived from them, are the sole responsibility of their authors. The material disclosed in our ESPE magazine does not compromise or represent the opinion of Banco de la República or that of its Board of Directors.
Abstract
fundamental task of the Banco de la República -Banrep- is to monitor inflation expectations, since these reflect the credibility of monetary policy. This document studies the formation of inflation expectations in Colombia from the information contained in surveys. Evidence suggests that survey forecasts are not consistently better (or worse) than model predictions. Furthermore, when survey expectations are included as an additional source in Banrep models, moderate gains are obtained in terms of the ability to forecast long time horizons. On the other hand, it is found that expectations converge to the Bank's inflation target, that is, they are anchored, although the degree of convergence depends on the type of agent and economic sector. Evidence of disagreement and bias is found in the aggregate expectation. This could be due to the heterogeneity of the agents, so it is not advisable to use the average of the surveys as an indicator of future inflation. Finally, the results indicate that in a changing economic environment, economic analysts do not efficiently review their expectations when they receive new information.
