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Inflation regimes and inflation expectations

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  • Joseph E. Gagnon

Abstract

This paper examines the formation of expectations about future inflation over long horizons. A key issue that agents must confront is the possibility that the economic policy framework— especially the monetary policy regime—could change at some future date. Agents are likely to base inferences about possible future regimes on experience over many years and decades past. This aspect of expectations formation may explain why inflation premiums in long-term bond yields are higher in countries with a long history of high inflation.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2008)
Issue (Month): May ()
Pages: 229-243

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Handle: RePEc:fip:fedlrv:y:2008:i:may:p:229-243:n:v.90no.3,pt.2

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Keywords: Inflation (Finance);

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  1. Boero,Gianna & Smith,Jeremy & Wallis,Kenneth F, 2006. "Uncertainty and disagreement in economic prediction : the Bank of England Survey of External Forecasters," The Warwick Economics Research Paper Series (TWERPS) 811, University of Warwick, Department of Economics.
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Cited by:
  1. Tierney, Heather L.R., 2009. "Examining the Ability of Core Inflation to Capture the Overall Trend of Total Inflation," MPRA Paper 22409, University Library of Munich, Germany, revised Feb 2010.
  2. Huh, Chan G. & Lansing, Kevin J., 2000. "Expectations, credibility, and disinflation in a small macroeconomic model," Journal of Economics and Business, Elsevier, Elsevier, vol. 52(1-2), pages 51-86.
  3. Tierney, Heather L.R., 2009. "A Local Examination for Persistence in Exclusions-from-Core Measures of Inflation Using Real-Time Data," MPRA Paper 13383, University Library of Munich, Germany, revised 03 Feb 2009.
  4. Gagnon, Joseph E., 2009. "Currency crashes and bond yields in industrial countries," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(1), pages 161-181, February.
  5. Heather R. Tierney & Bing Pan, 2012. "A poisson regression examination of the relationship between website traffic and search engine queries," Netnomics, Springer, Springer, vol. 13(3), pages 155-189, October.
  6. Brissimis, Sophocles & Migiakis, Petros, 2010. "Inflation persistence and the rationality of inflation expectations," MPRA Paper 29052, University Library of Munich, Germany.
  7. Gordon de Brouwer & James O'Regan, 1997. "Evaluating Simple Monetary-policy Rules for Australia," RBA Annual Conference Volume, Reserve Bank of Australia, in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
  8. da Silva Filho, Tito Nícias Teixeira, 2005. "Is there too much certainty when measuring uncertainty," MPRA Paper 16383, University Library of Munich, Germany.
  9. Philip Lowe & Luci Ellis, 1997. "The Smoothing of Official Interest Rates," RBA Annual Conference Volume, Reserve Bank of Australia, in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
  10. Tierney, Heather L.R., 2009. "Evaluating Exclusion-from-Core Measures of Inflation using Real-Time Data," MPRA Paper 17856, University Library of Munich, Germany.

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