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

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.
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Preprints, Working Papers, ...
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https://hal-sciencespo.archives-ouvertes.fr/hal-03473828
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Submitted on : Friday, December 10, 2021 - 4:27:22 AM
Last modification on : Friday, March 25, 2022 - 3:39:07 AM

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Paul Hubert, Harun Mirza. Inflation expectation dynamics: the role of past present and forward looking information. 2014. ⟨hal-03473828⟩

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