 Expectations' anchoring and inflation persistenceRudolfs Bems, Francesca Caselli, Francesco Grigoli () and Bertrand Gruss Journal of International Economics, 2021, vol. 132, issue C Abstract: Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct an index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies since 1989. We then study the response of consumer prices to terms-of-trade shocks and find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored. Keywords: Anchoring; Credibility; Inflation expectations; Inflation persistence; Terms of trade (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:132:y:2021:i:c:s0022199621000969 DOI: 10.1016/j.jinteco.2021.103516 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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