Consumers' inflation expectations and monetary policy in Europe

Jan Marc Berk
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Jan Marc Berk: Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics

No 20, Serie Research Memoranda from VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics

Abstract: This paper analyses the effects of monetary policy decisions on inflation expectations of European consumers. Using a novel approach that does not assume unbiasedness of expectations, which makes use of survey data on expected future as well as perceived past price developments and allows for non-normal peakedness and asymmetry, we convert qualitative survey responses of consumers in various European countries into quantitative time series of inflation expectations. After checking the rationality of the constructed expectations measures, we investigate the effects of unanticipated movements in interest rates and inflation on inflation expectations across European countries. We inter alia seek to explore whether the reaction of consumers in countries with more credible central banks differs from the reaction of consumers in less credible countries.

Keywords: Inflation expectations; Survey data; Monetary policy (search for similar items in EconPapers)
JEL-codes: C31 C32 E58 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:vua:wpaper:2000-20

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