Losing the inflation anchor

Ricardo Reis

No 2123, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: Inflation has an anchor in people’s expectations of what its long-run 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. Its main application is to the US Great Inflation. The data suggests that the anchor started drifting as early as 1967 and that this could have been spotted well before policymakers did. Using this approach on expectations data from Brazil, Turkey, South Africa, the US in the 1970s, and the US in 2021, confirms their usefulness to measure the inflation anchor in real time.

Pages: 46 pages
Date: 2021-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://www.lse.ac.uk/CFM/assets/pdf/CFM-Discussio ... MDP2021-23-Paper.pdf (application/pdf)

Related works:
Working Paper: Losing the inflation anchor (2022)
Journal Article: Losing the Inflation Anchors (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:cfm:wpaper:2123

Access Statistics for this paper

More papers in Discussion Papers from Centre for Macroeconomics (CFM) Contact information at EDIRC.
Bibliographic data for series maintained by Helen Power ().