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Some properties of inflation expectations in the euro area

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  • Petar Sorić
  • Ivana Lolić
  • Marina Matošec

Abstract

This paper assesses the euro area inflation expectations by examining five different survey‐based expectations indicators. The Survey of Professional Forecasters outperforms all other expectations indicators in terms of forecasting accuracy. We test the unbiasedness and efficiency of these indicators by viewing the Rational Expectations Hypothesis (REH) from a time‐varying perspective in a state space framework. Our model shows that the deviations from expectations' unbiasedness and efficiency are the most pronounced in the global financial crisis. Additionally, we offer evidence that the adaptive expectations and regressive expectations models are considerably more in line with actual data than REH.

Suggested Citation

  • Petar Sorić & Ivana Lolić & Marina Matošec, 2020. "Some properties of inflation expectations in the euro area," Metroeconomica, Wiley Blackwell, vol. 71(1), pages 176-203, February.
    • Handle: RePEc:bla:metroe:v:71:y:2020:i:1:p:176-203
    DOI: 10.1111/meca.12273
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    References listed on IDEAS

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    Cited by:

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    3. Andrea Borsato, 2022. "An agent-based model for Secular Stagnation in the USA: theory and empirical evidence," Journal of Evolutionary Economics, Springer, vol. 32(4), pages 1345-1389, September.

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