Inflation expectation dynamics:the role of past, present and forward looking information

Paul Hubert () and Harun Mirza ()
Additional contact information
Paul Hubert: Ofce,Sciences-po, Postal: 69,quai d'Orsay 75007, France
Harun Mirza: European Central Bank, Postal: Kaiserstr 29, 60311 Frankfurt Am Germany

No 2014-07, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: Assuming that private agents need to learn inflation dynamics to form their inflation expectations and that they believe a hybrid New-Keynesian Phillips Curve (NKPC) is the true data generating process of inflation, we aim at establishing the role of forward-looking information in inflation expectation dynamics. We find that longer term expectations are crucial in shaping shorter-horizon expectations. Professional forecasters put a greater weight on forward-looking information presumably capturing beliefs about the central bank inflation target or trend inflation while lagged inflation remains significant. Finally,the NKPC-based inflation expectations model fits well for professional forecasts in contrast to consumers.

Keywords: Survey expectations; inflation; New Keynesian Philipps Curve (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2014-03
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 (3)

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Related works:
Working Paper: Inflation expectation dynamics: the role of past present and forward looking information (2014)
Working Paper: Inflation expectation dynamics: the role of past present and forward looking information (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:1407

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