What drives updates of inflation expectations? A Bayesian VAR analysis for the G-7 countries

Ansgar Belke, Joscha Beckmann and Irina Dubova

VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association

Abstract: Inflation expectations play a crucial role for monetary policy transmission, having become even more important since the emergence of unconventional monetary policy. Based on survey data provided by Consensus Economics, we assess determinants of professional inflation expectations for the G7 economies. We emphasize the role of international spillovers in inflation expectations stemming from monetary policy decisions in the US. We also consider several possible determinants, such as changes in the path of monetary policy, oil price shocks and uncertainty measures. Based on a Bayesian VAR, we find significant evidence for international spillovers stemming from expectations about US monetary policy based on impulse-response functions and forecast error decompositions. We also provide similar evidence on spillovers from the dispersion across inflation forecasts.

Keywords: Bayesian VAR; expectations; inflation; survey data; updating (search for similar items in EconPapers)
JEL-codes: C22 E31 E52 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-eec, nep-ets, 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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Journal Article: What drives updates of inflation expectations? A Bayesian VAR analysis for the G‐7 countries (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc18:181518

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