Does Inflation Targeting Reduce the Dispersion of Price Setters’ Inflation Expectations?

Charlotte Paulie ()
Additional contact information
Charlotte Paulie: Uppsala University, Postal: Uppsala University , Box 256, 751 05 Uppsala

No 370, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Using detailed Swedish micro data on prices and costs, this paper documents a decrease in the dispersion of changes in prices and markups following the introduction of an official inflation target of 2 percent. Using a structural model to decompose the change in the price-change distribution by potential explanatory factors, about 63 percent of the decrease in the price-change dispersion can be attributed to a decrease in the cross-sectional variance of inflation expectations. The lower dispersion of inflation expectations results in a lower markup dispersion and a welfare gain equivalent to a 0.79 percent increase in consumption.

Keywords: Inflation targeting; price setting; misallocation; welfare (search for similar items in EconPapers)
JEL-codes: D84 E52 L11 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2019-04-01
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 (1)

Downloads: (external link)
https://www.riksbank.se/globalassets/media/rapport ... ion-expectations.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0370

Access Statistics for this paper

More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().