Anchored Inflation Expectations

Carlos Carvalho, Stefano Eusepi, , and Bruce Preston
Authors registered in the RePEc Author Service: Emanuel Moench

No 13900, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a theory of low-frequency movements in inflation expectations, and use it to interpret joint dynamics of inflation and inflation expectations for the United States and other countries over the post-war period. In our theory long-run inflation expectations are endogenous. They are driven by short-run inflation surprises, in a way that depends on recent forecasting performance and monetary policy. This distinguishes our theory from common explanations of low-frequency properties of inflation. The model, estimated using only inflation and short-term forecasts from professional surveys, accurately predicts observed measures of long-term inflation expectations and identifies episodes of unanchored expectations.

Keywords: Anchored expectations; Inflation expectations; Survey data (search for similar items in EconPapers)
JEL-codes: D83 D84 E32 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Anchored Inflation Expectations (2023)
Working Paper: Anchored inflation expectations (2020)
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