Long-Run Inflation Expectations

Jonas D. M. Fisher, Leonardo Melosi and Sebastian Rast

Working Papers from DNB

Abstract: Professional forecasters’ long-run inflation expectations overreact to news and exhibit persistent, predictable biases in forecast errors. A model incorporating overconfidence in private information and a persistent expectations bias—which generates persistent forecast errors across most forecasters—accounts for these two features of the data, offering a valuable tool for studying long-run inflation expectations. Our analysis highlights substantial, time- varying heterogeneity in forecasters’ responses to public information, with sensitivity declining across all forecasters when monetary policy is constrained by the effective lower bound. The model provides a framework to evaluate whether policymakers’ communicated inflation paths are consistent with anchored long-run expectations.

Keywords: Panel survey data; long-run inflation expectations; rationality; expectation bias; overconfidence; overreaction; central bank communications; anchoring (search for similar items in EconPapers)
JEL-codes: D83 E31 E37 E52 (search for similar items in EconPapers)
Date: 2025-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.dnb.nl/media/r2lltqhd/working_paper_no-829.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:dnb:dnbwpp:829

Access Statistics for this paper

More papers in Working Papers from DNB Contact information at EDIRC.
Bibliographic data for series maintained by DNB ().