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Inflation Expectations and the Conduct of Monetary Policy: A Review of Recent Evidence and Experience




This article explores the role of inflation expectations in the conduct of monetary policy. It reviews the various measures of inflation expectations used by central banks, including surveys and market-based indicators, and considers their advantages and disadvantages. It examines the critical role of inflation expectations in the framework that central banks use to understand, forecast, and control inflation. It also looks at their role as an indicator of central bank credibility. The behaviour of inflation expectations over the past two years is analyzed and policy conclusions are offered.

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  • Rose Cunningham & Brigitte Desroches & Eric Santor, 2010. "Inflation Expectations and the Conduct of Monetary Policy: A Review of Recent Evidence and Experience," Bank of Canada Review, Bank of Canada, vol. 2010(Spring), pages 13-25.
  • Handle: RePEc:bca:bcarev:v:2010:y:2010:i:spring10:p:13-25

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    References listed on IDEAS

    1. Weise, Charles L, 1999. "The Asymmetric Effects of Monetary Policy: A Nonlinear Vector Autoregression Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 85-108, February.
    2. Rhee, Wooheon & Rich, Robert W., 1995. "Inflation and the asymmetric effects of money on output fluctuations," Journal of Macroeconomics, Elsevier, vol. 17(4), pages 683-702.
    3. Thoma, Mark A., 1994. "Subsample instability and asymmetries in money-income causality," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 279-306.
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    Cited by:

    1. Robert Lavigne & Rhys R. Mendes & Subrata Sarker, 2012. "Inflation Targeting: The Recent International Experience," Bank of Canada Review, Bank of Canada, vol. 2012(Spring), pages 16-28.
    2. Kempa, Bernd & Riedel, Jana, 2013. "Nonlinearities in exchange rate determination in a small open economy: Some evidence for Canada," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 268-278.
    3. Bruine de Bruin, Wändi & van der Klaauw, Wilbert & van Rooij, Maarten & Teppa, Federica & de Vos, Klaas, 2017. "Measuring expectations of inflation: Effects of survey mode, wording, and opportunities to revise," Journal of Economic Psychology, Elsevier, vol. 59(C), pages 45-58.
    4. Pierre Fortin, 2016. "A Stable 4% Inflation Could Get Canadians One Half Million More Jobs," Cahiers de recherche 1604, CIRPEE.
    5. Łyziak, Tomasz & Paloviita, Maritta, 2017. "Anchoring of inflation expectations in the euro area: Recent evidence based on survey data," European Journal of Political Economy, Elsevier, vol. 46(C), pages 52-73.
    6. Jiménez Polanco, Miguel Alejandro & Lopez Hawa, Nabil, 2014. "Heterogeneidad y Racionalidad en las Expectativas de Inflación: Evidencia desagregada para República Dominicana
      [Heterogeneity and Rationality of Inflation Expectations: Disaggregated Evidence for
      ," MPRA Paper 75912, University Library of Munich, Germany.
    7. José Antonio Murillo Garza & Paula Sánchez Romeu, 2012. "Testing the Predictive Power of Mexican Consumers' Inflation Expectations," Working Papers 2012-13, Banco de México.
    8. Pongsak Luangaram & Yuthana Sethapramote & Chutiorn Tontivanichnon, 2015. "Inflation Expectations and Monetary Policy in Thailand," PIER Discussion Papers 3., Puey Ungphakorn Institute for Economic Research, revised Sep 2015.
    9. Easaw, Joshy, 2015. "Household Forming Inflation Expectations: Why Do They ‘Overreact’?," Cardiff Economics Working Papers E2015/14, Cardiff University, Cardiff Business School, Economics Section.
    10. Duran, Murat & Gülşen, Eda, 2013. "Estimating inflation compensation for Turkey using yield curves," Economic Modelling, Elsevier, vol. 32(C), pages 592-601.
    11. repec:eee:intfin:v:51:y:2017:i:c:p:133-141 is not listed on IDEAS

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