American Economic Journal: Macroeconomics
no. 1, January 2023
We develop a theory of low-frequency movements in inflation expectations, and use it to interpret joint dynamics of inflation and inflation expectations for the United States and other countries over the postwar period. In our theory, long-run inflation expectations are endogenous. They are driven by short-run inflation surprises, in a way that depends on recent forecasting performance and monetary policy. This distinguishes our theory from common explanations of low-frequency properties of inflation. The model, estimated using only inflation and short-term forecasts from professional surveys, accurately predicts observed measures of long-term inflation expectations and identifies episodes of unanchored expectations.
Carvalho, Carlos, Stefano Eusepi, Emanuel Moench, and Bruce Preston.
"Anchored Inflation Expectations."
American Economic Journal: Macroeconomics,
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
Price Level; Inflation; Deflation
Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications