Understanding Inflation Expectations: Data, Drivers and Policy Implications

František Brázdik, Tatiana Keseliova, Karel Musil, Radek Šnobl, Jan Šolc, Stanislav Tvrz and Jan Žáček

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: We investigate inflation expectations and their measures in the context of the 2022 inflation surge in the Czech Republic. Using data and econometric analyses, we explore how inflation expectations are formed and how they may affect inflation developments. To capture the overall trend of inflation expectations in the Czech economy, we develop a Common Inflation Expectations index. Additionally, we extend the CNB's g3+ core projection model by incorporating endogenous expectation premiums that reflect elevated inflation expectations. Utilizing the Common Inflation Expectations index and the modified model, we construct a simulation that provides policy-relevant outcomes when addressing high inflation. By presenting the simulation, we emphasize the importance and relevance of our research for practical policymaking.

Keywords: Forecasting; inflation; inflation expectations; inflation expectations index; structural modelling (search for similar items in EconPapers)
JEL-codes: C32 C50 E31 E37 E50 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mon and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2024/3

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