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"Don't know" Tells: Calculating Non-Response Bias in Firms' Inflation Expectations Using Machine Learning Techniques

December 25, 2019
Yosuke Uno*1
Ko Adachi*2

Abstract

This paper examines the "don't know" responses for questions concerning inflation expectations in the Tankan survey. Specifically, using machine learning techniques, we attempt to extract "don't know" responses where respondent firms are more likely to "know" in a sense. We then estimate the counterfactual inflation expectations of such respondents and examine the non-response bias based on the estimation results. Our findings can be summarized as follows. First, there is indeed a fraction of firms that respond "don't know" despite the fact that they seem to "know" something in a sense. Second, the number of such firms, however, is quite small. Third, the estimated counterfactual inflation expectations of such firms are not statistically significantly different from the corresponding official figures in the Tankan survey. Fourth and last, based on the above findings, the non-response bias in firms' inflation expectations likely is statistically negligible.

JEL Classification
C55, E31

Keywords
inflation expectations, PU classification; non-response bias

We thank Kohei Takata, Kosuke Aoki, Shigehiro Kuwabara, Toshitaka Sekine, Junichi Suzuki, Takuto Ninomiya, Hibiki Ichiue, Koki Inamura, Hidetaka Enomoto, Ko Nakayama, and Toshinao Yoshiba for useful comments. All remaining errors are ours. This paper does not necessarily reflect the views of the Bank of Japan.

  1. *1Research and Statistics Department, Bank of Japan (currently at the Payment and Settlement Systems Department)
    E-mail : yousuke.uno@boj.or.jp
  2. *2Research and Statistics Department, Bank of Japan (currently at the Monetary Affairs Department)
    E-mail : kou.adachi@boj.or.jp

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