Inflation expectation dynamics: the role of past present and forward looking information

Paul Hubert and Harun Mirza
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Harun Mirza: Centre de recherche de la Banque Centrale européenne - Banque Centrale Européenne

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Abstract: Assuming that private agents need to learn inflation dynamics to form their inflation expectations and that they believe a hybrid New-Keynesian Phillips Curve (NKPC) is the true data generating process of inflation, we aim at establishing the role of forward-looking information in inflation expectation dynamics. We find that longer term expectations are crucial in shaping shorter-horizon expectations. Professional forecasters put a greater weight on forward-looking information presumably capturing beliefs about the central bank inflation target or trend inflation while lagged inflation remains significant. Finally,the NKPC-based inflation expectations model fits well for professional forecasts in contrast to consumers.

Keywords: survey expectations; inflation; new keynesian; Philipps curve (search for similar items in EconPapers)
Date: 2014-03-01
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03473828
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Related works:
Working Paper: Inflation expectation dynamics:the role of past, present and forward looking information (2014)
Working Paper: Inflation expectation dynamics: the role of past present and forward looking information (2014)
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