How do inflation expectations form ? Evidence from a high-frequency survey 1

Content Provider	Semantic Scholar
Author	Galati, Gabriele Heemeijer, Peter
Copyright Year	2010
Abstract	We provide new insights on the formation of inflation expectations, in particular at a time of great financial and economic turmoil, by evaluating results from a survey conducted from July 2009 through July 2010. Participants in this survey answered a weekly questionnaire about their short-, mediumand long-term inflation expectations. Participants received common information sets with data relevant to euro area inflation. The survey allows us to address a number of important issues in the macro literature. First, we find evidence that inflation expectations depend on realized inflation data and Greek Credit Default Swap prices (the euro area fiscal crisis culminated during the survey). Second, we find considerable expectations homogeneity across participant subgroups at the short horizon, largely disappearing however at the medium and long horizons. Third, our evidence regarding the anchoring of long-term expectations at the ECB's inflation target is ambiguous. While median long-term expectations are at the target throughout the survey, long-term expectation means have been sensitive to economic shocks. Last, we find evidence that inflation expectations of central bank staff Granger-cause expectations of groups outside the central bank. JEL classification: E31, E32, E37, E52, C53.
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Alternate Webpage(s)	https://www.newyorkfed.org/medialibrary/media/research/conference/2010/consumer/PaperGalati_Heemeijer_Moessner.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article