How to Limit the Spillover from an Inflation Surge to Inflation Expectations?

Lena Dräger, Michael Lamla and Damjan Pfajfar

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: Using a randomized control trial on German consumers we show that information about rising inflation increases inflation expectations. This initial increase in expectations can be mitigated by providing forecasts of inflation. Information about (future) inflation affects the whole term structure of inflation expectations, where the effects are smaller for longer-run expectations. This information also causes changes in consumption and savings decisions. In subsequent months-when consumers realize that inflation is much higher than the provided forecast-|they reverse the reliance on information about inflation forecasts and rely again more on their initial priors.

Keywords: Short-run and long-run inflation expectations; inflation surge; randomized control trial; survey experiment; persistent or transitory inflation shock. (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 E58 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2023-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-694.pdf (application/pdf)

Related works:
Journal Article: How to limit the spillover from an inflation surge to inflation expectations? (2024)
Working Paper: How to Limit the Spillover from an Inflation Surge to Inflation Expectations? (2023)
Working Paper: How to limit the spillover from an inflation surge to inflation expectations (2022)
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:han:dpaper:dp-694

Access Statistics for this paper

More papers in Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät Contact information at EDIRC.
Bibliographic data for series maintained by Heidrich, Christian ().