Thinking Outside the Box: Do SPF Respondents Have Anchored Inflation Expectations?

Binder, Carola; Janson, Wesley; Verbrugge, Randal J.

doi:10.26509/frbc-wp-201915

Cited by 5 publications

(1 citation statement)

References 32 publications

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“…For professional forecasters, the microdata has shown some evidence of weakening anchoring. Binder, Janson, and Verbrugge (2021) suggest a measure of expectations anchoring based on the deviations of individual forecasters' long-run inflation expectations from target over a rolling window. This measure declined-implying improved anchoring-from 2012 until 2018.…”

Section: Figure 4 Inflation and Expected Inflation Since 2019mentioning

confidence: 99%

Expected and Realized Inflation in Historical Perspective

Binder

Kamdar

2022

Journal of Economic Perspectives

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This paper provides historical context for the relationship between expected and realized inflation. We begin with a discussion of early theoretical thought about how inflation expectations are formed. Then, we discuss survey- and asset- based measures of inflation expectations and assess their empirical relationship with realized inflation. Expected and realized inflation are strongly correlated over long samples, but over short samples the correlations can weaken. Lastly, to better understand the subtleties of the interaction between expected and realized inflation over short-lived but important events, we provide a narrative account of the relationship during the Great Depression of the 1930s, the Great Inflation of the 1970s, the Great Recession of 2008–2009, and the recent COVID-19 pandemic. These episodes offer compelling evidence of the importance of expectations and policy regime changes in inflation dynamics.

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Section: Figure 4 Inflation and Expected Inflation Since 2019mentioning

confidence: 99%

Expected and Realized Inflation in Historical Perspective

Binder

Kamdar

2022

Journal of Economic Perspectives

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Heterogeneity in individual expectations, sentiment, and constant-gain learning

Cole

Milani

2021

Journal of Economic Behavior & Organization

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The adaptive learning approach has been fruitfully employed to model the formation of aggregate expectations at the macroeconomic level, as an alternative to rational expectations. This paper uses adaptive learning to understand, instead, the formation of expectations at the micro-level, by focusing on individual expectations and, in particular, trying to account for their heterogeneity.We exploit survey data on output and inflation expectations by individual professional forecasters. We link micro and macro by endowing forecasters with the same information set that they would have as economic agents in a benchmark New Keynesian model. Forecasters are, however, allowed to differ in the constant gain values that they use to update their beliefs.We estimate the best-fitting constant gain for each forecaster. We also extract individual measures of sentiment, defined as the degrees of excess optimism and pessimism that cannot be justified by the near-rational learning model, given the state of the economy and the updated beliefs.Our results highlight the heterogeneity in the gain coefficients adopted by forecasters, which is particularly pronounced at the beginning of the sample. The median values are consistent with those typically estimated using aggregate data, and display some moderate time variation: they occasionally jump to higher values in the 1970-80s, and stabilize in the 1990s and 2000s. Individual sentiment is persistent and heterogeneous. Differences in sentiment, however, don't simply cancel out in the aggregate: the majority of forecasters exhibit excess optimism, or excess pessimism, at the same time.

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Navigating high inflation: A joint analysis of inflation dynamics and long-term inflation expectations in Latin America

Garcia,

Gimeno

2024

Latin American Journal of Central Banking

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Thinking Outside the Box: Do SPF Respondents Have Anchored Inflation Expectations?

Cited by 5 publications

References 32 publications

Expected and Realized Inflation in Historical Perspective

Expected and Realized Inflation in Historical Perspective

Heterogeneity in individual expectations, sentiment, and constant-gain learning

Navigating high inflation: A joint analysis of inflation dynamics and long-term inflation expectations in Latin America

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