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Monetary policy actions and long-run inflation expectations

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  • Michael T. Kiley

Abstract

The degree to which inflation expectations are anchored at long horizons is important for many issues in macroeconomics and finance. There has been little research examining observable measures of long-run inflation expectations. We investigate the evolution of survey measures of long-run inflation expectations in the United States. Our analysis emphasizes the role of a time-varying inflation objective of monetary policymakers. This focus makes monetary policy actions a key determinant of long-run inflation expectations. Our results have important implications for work on inflation dynamics, monetary policy rules, the costs of disinflation, and the term structure of interest rates.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2008-03.

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Date of creation: 2008
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Handle: RePEc:fip:fedgfe:2008-03

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Keywords: Inflation (Finance);

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References

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Citations

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Cited by:
  1. Kees E. Bouwman & Elvira Sojli & Wing Wah Tham, 2012. "Aggregate Stock Market Illiquidity and Bond Risk Premia," Tinbergen Institute Discussion Papers 12-140/IV/DSF46, Tinbergen Institute.
  2. Pierre L Siklos, 2010. "Relative Price Shocks, Inflation Expectations, and the Role of Monetary Policy," RBA Annual Conference Volume, in: Renée Fry & Callum Jones & Christopher Kent (ed.), Inflation in an Era of Relative Price Shocks Reserve Bank of Australia.
  3. Del Negro, Marco & Eusepi, Stefano, 2011. "Fitting observed inflation expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 35(12), pages 2105-2131.
  4. Todd E. Clark & Troy Davig, 2008. "An empirical assessment of the relationships among inflation and short- and long-term expectations," Research Working Paper RWP 08-05, Federal Reserve Bank of Kansas City.
  5. Todd E. Clark & Taeyoung Doh, 2011. "A Bayesian evaluation of alternative models of trend inflation," Working Paper 1134, Federal Reserve Bank of Cleveland.
  6. Pavol Povala & Anna Cieslak, 2012. "Understanding bond risk premia," 2012 Meeting Papers 771, Society for Economic Dynamics.
  7. Michael T. Kiley, 2009. "Inflation expectations, uncertainty, the Phillips Curve, and monetary policy," Finance and Economics Discussion Series 2009-15, Board of Governors of the Federal Reserve System (U.S.).
  8. Michael T. Kiley, 2008. "Inflation expectations, uncertainty, the Phillips curve, and monetary policy - comments," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 53.
  9. Eric Schaling & Marco Hoeberichts, 2010. "Why Speed Doesn’t Kill: Learning to Believe in Disinflation," De Economist, Springer, vol. 158(1), pages 23-42, April.

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