Jeyhun Abbasov

Central Bank of Azerbaijan, Research Department, 

Baku, Azerbaijan

Azerbaijan State University of Economics, Economy and Administration Department, 

Baku, Azerbaijan

Institute of Control Systems of ANAS,

Baku, Azerbaijan

E-mail: ceyhunabbasoglu@gmail.com

ORCID 0000-0001-8187-441X

Households survey and inflation expectation

Khagani Karimov

Central Bank of Azerbaijan, Monetary Policy department,

Baku, Azerbaijan.

E-mail: khaganikarimov@gmail.com

Abstract. Central Bank of Azerbaijan intends to move to the Inflation Targeting regime in the medium term. The new regime requires the development of new models and methodologies. Though the Bank’s researchers have already developed different advanced models, most of them use the quantitative factor analysis of inflation. The current paper investigates an alternative approach that allows the estimation of inflation expectations by using the survey data. This approach, which has never been used before in Azerbaijan, helps to understand the behavior of the households in detail and enables converting qualitative data into quantitative data. Assuming that households’ responses have normal and uniform probability distributions, the inflation expectations were estimated for the period of 2013Q3-2020Q1 in Azerbaijan.

Received: September, 2019

1st Revision: January, 2020

Accepted: June, 2020

DOI: 10.14254/2071-789X.2020/13-2/14

JEL Classification: C01, C15, C83, D12

Keywords: inflation expectation, household surveys, indifference intervals, forecasting error, unbiasedness of expectations, efficiency of expectation