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Inflation Expectations and Inflation Uncertainty in the Eurozone: Evidence from Survey Data

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  • Ivo J. M. Arnold
  • Jan J.G. Lemmen

Abstract

This paper uses the European Commission’s Consumer Survey to assess whether inflation expectations have converged and whether inflation uncertainty has diminished following the introduction of the Euro in Europe. Consumers’ responses to the survey suggest that inflation expectations depend more on past national inflation rates than on the ECB’s anchor for price stability. The convergence in inflation expectations does not appear to be faster than the convergence in actual inflation rates. Regarding inflation uncertainty, the data indicate a relationship with country size, suggesting that within EMU, inflation uncertainty may increase in countries that have a smaller influence on ECB policy.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-02/cesifo1_wp1667.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1667.

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Date of creation: 2006
Date of revision:
Handle: RePEc:ces:ceswps:_1667

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Keywords: monetary union; inflation differentials; consumer survey;

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References

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  1. Söderlind, Paul, 2000. "Inflation Forecast Uncertainty," CEPR Discussion Papers 2499, C.E.P.R. Discussion Papers.
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  14. Enrique Alberola & José M. Marqués, 1999. "On the Relevance and Nature of Regional Inflation Differentials: the Case of Spain," Banco de España Working Papers 9913, Banco de España.
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  16. Servaas Deroose & Sven Langedijk & Werner Roeger, 2004. "Reviewing adjustment dynamics in EMU: from overheating to overcooling," European Economy - Economic Papers 198, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
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  18. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
  19. Jan Marc Berk & Gerbert Hebbink, 2006. "The anchoring of European inflation expectations," DNB Working Papers 116, Netherlands Central Bank, Research Department.
  20. Gerberding, Christina, 2001. "The information content of survey data on expected price developments for monetary policy," Discussion Paper Series 1: Economic Studies 2001,09, Deutsche Bundesbank, Research Centre.
  21. Luc Aucremanne & Marianne Collin & Thomas Stragier, 2007. "Assessing the Gap between Observed and Perceived Inflation in the Euro Area : Is the Credibility of the HICP at Stake ?," Working Paper Research 112, National Bank of Belgium.
  22. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June.
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Cited by:
  1. Forges, Françoise, 2005. "The ex ante incentive compatible core of an exchange economy with and without indivisibilities," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/167, Université Paris-Dauphine.
  2. Steffen Henzel & Stephan Sauer, 2006. "Konsequenzen der Inflationsunterschiede im Euroraum," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 59(11), pages 12-27, 06.
  3. Andrzej Toroj, 2009. "Macroeconomic adjustment and heterogeneity in the euro area," National Bank of Poland Working Papers 54, National Bank of Poland, Economic Institute.
  4. Klaus Abberger & Gebhard Flaig & Wolfgang Nierhaus, 2007. "ifo Konjunkturumfragen und Konjunkturanalyse : ausgewählte methodische Aufsätze aus dem ifo Schnelldienst," ifo Forschungsberichte, Ifo Institute for Economic Research at the University of Munich, number 33, 09.

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