ABSTRACT

This section considers the predictive performance of a quantitative indicator of consumers’ inflation expectations in the euro area, and across the euro area countries. We present a number of forecast performance summary statistics. The available survey data on consumers’ inflation expectations in the euro area provide only qualitative information on the likely direction of change in consumers’ inflation expectations. As a result, an assessment of the predictive performance of consumers must be based on quantitative estimates derived from such qualitative surveys. In what follows, the quantification procedure suggested by Berk (1999) is applied to derive estimates of inflation expectations for the euro area and the five largest constituent countries.3