Estimados Académicos FEN,

Les comunicamos que el Martes 11 de Agosto a las 14 horas se realizará el Seminario del Departamento de Economía.

Presenta: Michael Pedersen, Ph.D. Economics, European University Institute (Italy). Senior Economist, Central Bank of Chile.

Título: Surveying the survey. What can we learn about the effect of monetary policy ininflation expectations?

Abstract: The replies to a questionnaire that was sent to the respondents of the Chilean Financial Traders Survey (FTS) reveal differences in how the traders understand questions regarding the future monetary policy rate (MPR); some of them answer what they think the central bank will do, while others what they think it should do. There are also important differences in the way traders make their forecasts. The FTS is distinctive from similar surveys in the sense that it is conducted immediately before and after the monetary policy meetings. This study employs a novel dataset that consists of FTS micro observations to assess the extent to which heterogeneity in the replies to the questionnaire affects how agents take into account MPR surprises when updating inflation expectations.
While the should-do traders incorporate MPR surprises in their one-year-ahead inflation expectations, it is not evident that will-do respondents do so. This could imply that the
“model” traders have in mind includes an endogenous MPR path, which is not necessarily in accordance with what they think the central bank is going to do in the short run. Agents that merely base their forecasts on models do not seem to incorporate MPR surprises in their update of the inflation expectations, while those that use information from financial markets generally seem to do so. This, however, is only the will-do traders, which could be because asset prices incorporate what the market thinks the central bank is going to do. Two-years-ahead inflation expectations are not affected by MPR surprises. The results stress the importance of understanding on what basis survey respondents answer the questions.

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