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Inflation Expectations and Monetary Policy Surprises

Snezana Eminidou, Marios Zachariadis () and Elena Andreou

Scandinavian Journal of Economics, 2020, vol. 122, issue 1, 306-339

Abstract: We estimate monetary policy surprises for European consumers over time, based on monetary policy changes that were unanticipated according to consumers’ stated beliefs. We find that such monetary policy surprises have the opposite impact on inflation expectations from the impact found when assuming that consumers are well informed. Relaxing the latter assumption by focusing on consumers’ stated beliefs, unanticipated increases in the interest rate raise inflation expectations before the 2008 financial crisis. This is consistent with imperfect information theoretical settings where interest rate hikes are interpreted as positive news about the state of the economy by consumers who know that policymakers have relatively more information.

Date: 2020
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https://doi.org/10.1111/sjoe.12350

Related works:
Working Paper: Inflation Expectations and Monetary Policy Surprises (2018) Downloads
Working Paper: Inflation Expectations and Monetary Policy Surprises (2017) Downloads
Working Paper: Inflation expectations and monetary policy surprises (2017) Downloads
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