The Role of Inflation Expectations in the New EU Member States: Consumer Survey Based Results

Konstantins Benkovskis

Czech Journal of Economics and Finance (Finance a uver), 2008, vol. 58, issue 07-08, 298-317

Abstract: The objective of this paper is to analyze the link between inflation expectations and actual inflation in the New EU Member States (NMS). To achieve this goal, the results of a qualitative consumer survey were transformed into a quantitative measure of inflation expectations using the Carlson-Parkin approach. Afterwards, small-scale VAR models capturing actual inflation and inflation expectations were produced. Both the survey data and the quantified values of inflation expectations confirm that inflation expectations increased substantially prior to the NMS accession to the EU (in the case of Slovenia prior to accession to the EMU), with the expected inflation rate surging notably above the observed price increases. The findings of the VAR models indicate that inflation expectations have a positive impact on actual inflation in almost all the NMS; however, the potential problems of omitted variables and short sample period reduce the significance of this result.

Keywords: inflation expectations; survey data; VAR model (search for similar items in EconPapers)
JEL-codes: C32 C42 D84 E31 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:58:y:2008:i:7-8:p:298-317

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