Anchored inflation expectations

Carlos Carvalho, Stefano Eusepi, Emanuel Moench and Bruce Preston

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We develop a theory of low-frequency movements in inflation expectations, and use it to interpret joint dynamics of inflation and inflation expectations for the United States and other countries over the post-war period. In our theory long-run inflation expectations are endogenous. They are driven by short-run inflation surprises, in a way that depends on recent forecasting performance and monetary policy. This distinguishes our theory from common explanations of low-frequency properties of inflation. The model, estimated using only inflation and short-term forecasts from professional surveys, accurately predicts observed measures of long-term inflation expectations and identifies episodes of unanchored expectations.

Keywords: Anchored expectations; inflation expectations; survey data (search for similar items in EconPapers)
JEL-codes: D83 D84 E32 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2020-03
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Anchored Inflation Expectations (2023)
Working Paper: Anchored Inflation Expectations (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2020-25

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