Updating Inflation Expectations

Michael Lamla and Samad Sarferaz

No 201216, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: This paper investigates how inflation expectations evolve. In particular, we analyze the time-varying nature of the propensity to update expectations and its potential determinants. For this purpose we set up a flexible econometric model that tracks the formation of inflation expectations of consumers at each moment in time. We show that the propensity to update inflation expectations changes substantially over time and is related to the quantity and the quality of news.

Keywords: inflation expectation formation; time-varying parameters; Bayesian methods disagreement; media coverage; stochastic volatility. (search for similar items in EconPapers)
JEL-codes: D83 E31 E37 E52 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (15)

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https://www.uni-marburg.de/en/fb02/research-groups ... rs/16-2012_lamla.pdf First version, 2012 (application/pdf)

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Working Paper: Updating inflation expectations (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201216

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