Download or read book Inflation Persistence and the Rationality of Inflation Expectations written by Petros M. Migiakis and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The rational expectations hypothesis for survey and model-based inflation forecasts - from the Survey of Professional Forecasters and the Greenbook respectively - is examined by properly taking into account persistence in the data. The finding of nearunit-root effects in inflation and inflation expectations motivates the use of a local-tounity specification of the inflation process that enables us to test whether the data are generated by locally non-stationary or stationary processes. Thus, we test, rather than assume, stationarity of near-unit-root processes. In addition, we set out an empirical framework for assessing relationships between locally non-stationary series. In this context, we test the rational expectations hypothesis by allowing the co-existence of a long-run relationship obtained under the rational expectations restrictions with short-run "learning" effects. Our empirical results indicate that the rational expectations hypothesis holds in the long run, while forecasters adjust their expectations slowly in the short run. This finding lends support to the hypothesis that the persistence of inflation comes from the dynamics of expectations.

Download or read book Expectations Anchoring and Inflation Persistence written by Mr.Rudolfs Bems and published by International Monetary Fund. This book was released on 2018-12-11 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989. We then study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates. We find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored.

Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.

Download or read book How Rational Are Inflation Expectations A Vector Autoregression Decomposition of Inflation Forecasts and Their Errors written by Timothy J. Landvogt and published by . This book was released on 2002-05-01 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent successive over-predictions of inflation have renewed interest in the rationality of forecasters and what causes their forecasts to deviate from rational expectations This paper examines inflation forecast data from the Livingston Survey and the ASA/NBER Survey of Professional Forecasters over the past 30 years to determine what publicly available macroeconomic information, if any, explains the persistence of forecast errors. A reduced form VAR is used to identify potential inefficiencies and then calculate the impulse response functions and variance decompositions of forecasts errors to analyze how shocks to the other endogenous variables of the VAR affect forecast error behavior. The study finds that the majority of public information is used by forecasters efficiently and therefore, supports weak form rational expectations of inflation, however, there appears to be significant inefficiency in the use of past forecast errors and the term structure of interest rates in the forecasts of both surveys. The IRF analysis also uncovers a significant change in the structure and variance of forecast errors that occurs in the early 1980's. It is hypothesized that this structural change of inflation forecast errors is related to a change in the way the Federal Reserve has conducted monetary policy since the end of the Volcker deflation in 1983.

Download or read book Expectations Anchoring and Inflation Persistence written by Rudolfs Bems and published by . This book was released on 2021 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct an index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies since 1989. We then study the response of consumer prices to terms-of-trade shocks and find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored.

Download or read book Shocks to Inflation Expectations written by Mr. Philip Barrett and published by International Monetary Fund. This book was released on 2022-04-29 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations, estimating a semi-structural VAR where an expectation shock is identified as that which causes measured expectations to diverge from rationality. Using data for the United States, we find that a positive inflation expectations shock is deflationary and contractionary: inflation, output, and interest rates all fall. These results are inconsistent with the standard New Keynesian model, which predicts inflation and interest rate hikes. We discuss possible resolutions to this new puzzle.

Download or read book Inflation Expectations written by Peter J N Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved, including the spread of inflation targeting and the large reduction in actual inflation that has been observed in most countries over the past decade or so.

Download or read book The Inflation Targeting Debate written by Ben S. Bernanke and published by University of Chicago Press. This book was released on 2007-11-01 with total page 469 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.

Download or read book Inflation Persistence in an Era of Well Anchored Inflation Expectations written by John Carroll Williams and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book NBER Macroeconomics Annual 2003 written by Mark Gertler and published by Mit Press. This book was released on 2004 with total page 432 pages. Available in PDF, EPUB and Kindle. Book excerpt: The NBER Macroeconomics Annual presents pioneering work in macroeconomics by leading academic researchers to an audience of public policymakers and the academic community. Each commissioned paper is followed by comments and discussion. This year's edition provides a mix of cutting-edge research and policy analysis on such topics as productivity and information technology, the increase in wealth inequality, behavioral economics, and inflation.

Download or read book Imperfect Rationality and Inflationary Inertia written by Ângelo Marsiglia Fasolo and published by . This book was released on 2003 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Inflation the Quantity Theory and Rational Expectations written by Eduard Jan Bomhoff and published by North Holland. This book was released on 1980 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Rational Bias in Inflation Expectations written by Robert G. Murphy and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Can Rational Expectations Sticky price Models Explain Inflation Dynamics written by Jeremy Bay Rudd and published by . This book was released on 2003 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Inflation Expectations and the Transmission of Monetary Policy written by John M. Roberts and published by . This book was released on 1998 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Inflation Expectations and Inflation Persistence written by Shiu-Sheng Chen and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between inflation expectations and inflation persistence. Using a Markov-switching model of US inflation, we first show that higher inflation persistence is associated with a higher mean level of inflation and greater inflation uncertainty. Moreover, we obtain evidence that an increase in inflation expectations predicts the greater likelihood of being in a regime with highly persistent inflation. Thus, inflation expectations serve as an early warning indicator of the risk of persistently high inflation.

Download or read book Near rationality and Inflation in Two Monetary Regimes written by Laurence M. Ball and published by . This book was released on 2000 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sticky-price models with rational expectations fail to capture the inertia in U.S. inflation. Models with backward-looking expectations capture current inflation behavior, but are unlikely to fit other monetary regimes. This paper seeks to overcome these problems with a near-rational model of expectations. In the model, agents make univariate forecasts of inflation: they use information on past inflation optimally, but they ignore other variables. The paper tests sticky-price models with near-rational expectations for two periods in U.S. history, the post-1960 period of persistent inflation and the period from 1879 to 1914, when inflation was not persistent. The models fit the data for both periods; in contrast, both rational-expectations and backward-looking models fail for at least one period