A research on inflation expectations measurements and applications: A view based on network behavior

In this paper, a thinking and research method of inflation expectations measurements based on web search data is proposed. First, a conceptual framework between search data and inflation expectations is built in order to clarify their mechanism of association. Then, a index of web inflation expectations is built by using principal component analysis and its effectiveness is verified. The results show that the index of inflation expectations based on web search behaviour is highly correlated with inflation trends, and a stable long-term co integration relationship exists between them, and the actual inflation is the Granger cause of inflation expectations. The conclusions by applying the method presented in this paper are agreed to the mainstream research in academe, which proves the rationality and feasibility of the research ideas and offers new sources of data to monitor the macroeconomic situation.

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