Evidence from the Ifo World Economic Survey

This paper presents a new methodology for the quantification of qualitative survey data. Traditional conversion methods, such as the probability approach of Carlson and Parkin (1975) or the time-varying parameters model of Seitz (1988), require very restrictive assumptions concerning the expectations formation process of survey respondents. Above all, the unbiasedness of expectations, which is a necessary condition for rational-ity, is imposed. Our approach avoids these assumptions. The novelty lies in the way the boundaries inside of which survey respondents expect the variable under consideration to remain unchanged are determined. Instead of deriving these boundaries from the sta-tistical properties of the reference time-series (which necessitates the unbiasedness as-sumption), we directly queried them from survey respondents by a special question in the Ifo World Economic Survey. The new methodology is then applied to expectations about the future development of inflation obtained from the Ifo World Economic Survey