How Do Inflation Expectations Form? New Insights from a High-Frequency Survey

Galati, Gabriele; Heemeijer, Peter; Moessner, Richhild

doi:10.2139/ssrn.1950594

Cited by 13 publications

(4 citation statements)

References 32 publications

(15 reference statements)

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“…In general, however, this difference consists of four components: expected inflation, an inflation risk premium, a liquidity premium, and other factors (Hördahl 2009;Christiansen, Dion, and Reid 2004). Hence, extracting expected inflation requires the use of strong assumptions, and any estimate of expected inflation is necessarily imprecise (Galati, Heemeijer, and Moessner 2011).…”

Section: 2 Market-based Measuresmentioning

confidence: 99%

“…Several studies have examined whether inflation expectations became unanchored during and after the global financial crisis, which was followed by a wave of unconventional monetary policy actions. During the period immediately following the crisis, market-based inflation expectations in the United States and the United Kingdom became more sensitive to macroeconomic news, but neither survey-based nor market-based long-term inflation expectations in the Euro Area became unanchored (Galati, Heemeijer, and Moessner 2011;Galati, Poelhekke, and Zhou 2011).…”

Section: Reis 2002)mentioning

confidence: 99%

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Inflation Expectations: Review and Evidence

Kose¹,

Matsuoka²,

Panizza³

et al. 2019

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This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced economies, despite notable improvements over the past two decades. Indeed, in EMDEs, long-term inflation expectations are more sensitive to both domestic and global inflation shocks. However, EMDEs tend to be more successful in anchoring inflation expectations in the presence of an inflation targeting regime, high central bank transparency, strong trade integration, and a low level of public debt.Abstract. This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced economies, despite notable improvements over the past two decades. Indeed, in EMDEs, long-term inflation expectations are more sensitive to both domestic and global inflation shocks. However, EMDEs tend to be more successful in anchoring inflation expectations in the presence of an inflation targeting regime, high central bank transparency, strong trade integration, and a low level of public debt.

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Section: 2 Market-based Measuresmentioning

confidence: 99%

Section: Reis 2002)mentioning

confidence: 99%

Inflation Expectations: Review and Evidence

Kose¹,

Matsuoka²,

Panizza³

et al. 2019

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“…inflation. Adding to the right-hand part of the equation, the lagging value of the dependent variable reflects the inertial nature of inflation, attributable to the adaptive nature of inflation expectations for a portion of economic agents, which has been confirmed by a number of modern papers (see, e.g., Doepke & Schneider, 2006, Galati et al, 2011; e is the nominal exchange rate for the national currency of the given country (increasing this variable means cheapening the national currency); OP represents the level of oil prices; IT is a dummy variable equal to one during periods when the given country targets inflation, and equal to zero during other periods; X is the vector of control variables; μ is the fixed country effects removing the shift of results due to a country's heterogeneity within the sample. In this kind of specification, the λ shows the instantaneous foreign exchange rate elasticity of prices (i.e.…”

Section: The Data and The Econometric Approachmentioning

confidence: 78%

Monetary policy and the effect of the oil prices pass-through to inflation

Kartaev¹,

Medvedev²

2019

RUJEC

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The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for 2000–2017. It is shown that the impact of changes in oil prices on inflation is carried out predominantly through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the oil prices pass-through, limiting the negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger pass-through, helping to reduce inflation.

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“…However, some recent research based on survey measures suggest that euro area inflation expectations remained well-anchored for longer-term horizons (see, e.g.,Galati, Heemeijer, and Moessner (2011) or European Central Bank (2012)).…”

mentioning

confidence: 99%