The Dynamics of European Inflation Expectations
AbstractWe investigate the relevance of the Carroll's sticky information model of inflation expectations for four major European economies (France, Germany, Italy and the United Kingdom). Using survey data on household and expert inflation expectations we argue that the model adequately captures the dynamics of household inflation expectations. We estimate two alternative parametrizations of the sticky information model which differ in the stationarity assumptions about the underlying series. Our baseline stationary estimation suggests that the average frequency of information updating for the European households is roughly once in 18 months. The vector error-correction model implies households update information about once a year.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 571.
Length: 16 p.
Date of creation: 2006
Date of revision:
Publication status: Published in: The B.E. Journal of Macroeconomics 8 (2008) 1
Inflation expectations; sticky information; inflation persistence;
Other versions of this item:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-29 (All new papers)
- NEP-CBA-2006-04-29 (Central Banking)
- NEP-EEC-2006-04-29 (European Economics)
- NEP-MAC-2006-04-29 (Macroeconomics)
- NEP-MON-2006-04-29 (Monetary Economics)
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