A framework for decomposing shocks and measuring volatilities derived from multi-dimensional panel data of survey forecasts

This work applies previously published frameworks developed for analyzing multi-dimensional panel data of survey forecasts to IPD forecasts from the Survey of Professional Forecasters. The paper expands on these frameworks, demonstrates that the frameworks imply the existence of new and richer measures of shocks and volatilities, and shows how these measures can be extracted from multi-dimensional forecast panels. Three distinct types of economic shocks (cumulative shocks, cross-sectional shocks, and discrete shocks) and implied volatility measures based on these shocks are calculated for IPD inflation over the period 1969 through 2004. GMM tests for forecaster biases are conducted using the expanded framework.