Heterogeneous beliefs and the Phillips curve

Roland Meeks and Francesca Monti

No 807, Bank of England working papers from Bank of England

Abstract: We establish a set of novel empirical facts concerning cross-section distributions of inflation expectations reported in surveys. Almost all the variation in expectations about their mean may be summarized via three factors we call disagreement, skew, and shape. We adopt a functional principal component regression approach to estimating forward-looking models of inflation that exploits the heterogeneity present in individual-level data. By using survey information more effectively, our approach reveals an enhanced role for expectations in inflation dynamics that is robust to lagged inflation, trend inflation, and supply factors. Our findings hold in similar form across two major economies.

Keywords: Survey expectations; inflation dynamics; density function; functional regression; functional principal components (search for similar items in EconPapers)
JEL-codes: C55 E31 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2019-06-28
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Heterogeneous beliefs and the Phillips curve (2023)
Working Paper: Heterogeneous beliefs and the Phillips curve (2022)
Working Paper: Heterogeneous Beliefs and the Phillips Curve (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0807

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