Pierdzioch, ChristianReid, Monique B.Gupta, Rangan2019-05-092019-05-092018Christian Pierdzioch, Monique B. Reid & Rangan Gupta (2018) On the directional accuracy of inflation forecasts: evidence from South African survey data, Journal of Applied Statistics, 45:5, 884-900, DOI: 10.1080/02664763.2017.1322556.0266-4763 (print)1360-0532 (online)10.1080/02664763.2017.1322556http://hdl.handle.net/2263/69074We study the information content of South African inflation survey data by determining the directional accuracy of both short-term and long-term forecasts. We use relative operating characteristic (ROC) curves, which have been applied in a variety of fields including weather forecasting and radiology, to ascertain the directional accuracy of the forecasts. A ROC curve summarizes the directional accuracy of forecasts by comparing the rate of true signals (sensitivity) with the rate of false signals (one minus specifity). A ROC curve goes beyond market-timing tests widely studied in earlier research as this comparison is carried out for many alternative values of a decision criterion that discriminates between signals (of a rising inflation rate) and nonsignals (of an unchanged or a falling inflation rate). We find consistent evidence that forecasts contain information with respect to the subsequent direction of change of the inflation rate.en© 2017 Informa UK Limited, trading as Taylor & Francis Group. This is an electronic version of an article published in Journal of Applied Statistics, vol. 45, no. 5, pp. 884-900, 2018.doi : . Journal of Applied Statistics is available online at : http://www.tandfonline.comloi/cjas20.Relative operating characteristic (ROC)Inflation rateForecastingDirectional accuracySouth Africa (SA)Postprint Article