A Dynamic Model for Ordinal Time Series: An Application to Consumers’ Perceptions of Inflation

This article discusses an innovative model for time series ordinal data, which develops the well-established CUB model to allow for time-varying parameters. This is a mixture of a Uniform and a Shifted Binomial distribution, characterized by two parameters that can be interpreted as a measure of the ability of the rater to use the available rating scale and the degree of liking/disliking about the item. For illustrative purposes, the method is applied to consumers’ perceptions of inflation in Italy.