A choice-based approach to the measurement of inflation expectations [Dataset]

This approach, which asks respondents to assign probabilities to pre-specified ranges, has proven highly informative, but also faced criticism in recent periods of elevated and volatile inflation. We propose a new method to elicit the full distribution of inflation expectations, which is rooted in decision theory and can be implemented in standard surveys.

In two large surveys and a laboratory experiment, we demonstrate that the proposed method leads to well-defined expectations that fulfil both subjective and objective quality criteria. The method is neither perceived as more difficult nor does it take more time to complete compared to the current standard. In contrast to density forecasts, the method is robust to differences in the state of the economy and thus allows comparisons across time and across countries.