Open access
Date
2013-07Type
- Working Paper
ETH Bibliography
yes
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Abstract
In this paper we explore the degree of anchoring of consumers’ long-run inflation expectations. If expectations are firmly anchored, short- and long-run expectations should show no comovement in response to transitory shocks. Utilizing the University of Michigan Survey of Consumer’s rotating panel microstructure, we can identify changes in inflation expectations of individual consumers over time. Our results indicate that long-run inflation expectations became more anchored over the last decades. While the degree of comovement fell significantly after 1996, the probability of a joint adjustment stayed constant. Regarding the possible determinants, we find that consumers’ rising interest rate expectations and perceived news on the monetary policy stance have a detrimental effect on the anchoring of long-run expectations. This effect is no longer present in the post-1996 period. Notably, a positive effect of perceived news on government debt on the degree of comovement emerges after 1996, alluding to a potentially problematic link between fiscal and monetary policy. Show more
Permanent link
https://doi.org/10.3929/ethz-a-009920757Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
Microdata; BETRIEBSWIRTSCHAFTLICHE PROGNOSE; MONETARY POLICY; Inflation expectations; INFLATION; BUSINESS FORECASTS; News; GELDPOLITIK; AnchoringOrganisational unit
03716 - Sturm, Jan-Egbert / Sturm, Jan-Egbert
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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ETH Bibliography
yes
Altmetrics