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Economic policy uncertainty and inflation expectations

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  • K. ISTREFI
  • A. PILOIU

Abstract

This Rue de la Banque explores the dynamic relationship between uncertainty concerning economic policy and inflation expectations, for the US and the euro area, during the period 1999-2012. We find that, in response to an increase in policy uncertainty, economic activity contracts and short-term inflation expectations fall. Moreover, our results suggest that during this period, policy uncertainty posed risks to the anchoring of long-term inflation expectations.

Suggested Citation

  • K. Istrefi & A. Piloiu, 2016. "Economic policy uncertainty and inflation expectations," Rue de la Banque, Banque de France, issue 33, november..
    • Handle: RePEc:bfr:rueban:2016:33
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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