Losing the Inflation Anchors

Ricardo Reis

Brookings Papers on Economic Activity, 2021, vol. 52, issue 2 (Fall), 307-379

Abstract: Inflation has an anchor in people's expectations of what itslongrun value will be. If expectations persistently change, then the anchor is adrift; if they differ from the central bank's target, the anchor is lost. This paper uses data on expectations from market prices, from professional surveys, and from the cross-sectional distribution of household surveys to measure shifts in this anchor. The paper's main application is to the Great Inflation in the United States. The data suggest that the anchor started drifting as early as 1967 and that this could have been spotted well before policymakers noticed it. Other applications using expectations data from Brazil, Turkey, South Africa, the United States in the 1970s, and the United States in 2021 confirm the data's usefulness to measure the inflation anchor in real time.

Keywords: US economy; monetary policy; inflation; inflation anchor (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.brookings.edu/articles/losing-the-inflation-anchor/ (text/html)

Related works:
Working Paper: Losing the inflation anchor (2022)
Working Paper: Losing the inflation anchor (2021)
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:bin:bpeajo:v:52:y:2021:i:2021-02:p:307-379

Access Statistics for this article

More articles in Brookings Papers on Economic Activity from Economic Studies Program, The Brookings Institution Contact information at EDIRC.
Bibliographic data for series maintained by Haowen Chen ().