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Inflation expectations, disagreement, and monetary policy

Author

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  • Hoffmann, Mathias
  • Hürtgen, Patrick

Abstract

Survey data on inflation expectations show that: (i) private sector forecasts and central bank forecasts are not fully aligned and (ii) private sector forecasters disagree about inflation expectations. To reconcile these two facts we introduce dispersed information in a New Keynesian model, where as a result, inflation expectations differ between the private sector and the central bank. We show that output and inflation responses change markedly when the central bank responds to private sector inflation expectations rather than to their own.

Suggested Citation

  • Hoffmann, Mathias & Hürtgen, Patrick, 2016. "Inflation expectations, disagreement, and monetary policy," Economics Letters, Elsevier, vol. 146(C), pages 59-63.
  • Handle: RePEc:eee:ecolet:v:146:y:2016:i:c:p:59-63
    DOI: 10.1016/j.econlet.2016.07.011
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    References listed on IDEAS

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    1. George-Marios Angeletos & Jennifer La'O, 2010. "Noisy Business Cycles," NBER Chapters,in: NBER Macroeconomics Annual 2009, Volume 24, pages 319-378 National Bureau of Economic Research, Inc.
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    7. Stefano Eusepi & Richard Crump & Emanuel Moench & Philippe Andrade, 2014. "Noisy Information and Fundamental Disagreement," 2014 Meeting Papers 797, Society for Economic Dynamics.
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    12. Leonardo Melosi, 2014. "Signaling Effects of Monteray Policy," 2014 Meeting Papers 830, Society for Economic Dynamics.
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    Cited by:

    1. Falck, Elisabeth & Hoffmann, Mathias & Hürtgen, Patrick, 2017. "Disagreement and monetary policy," Discussion Papers 29/2017, Deutsche Bundesbank.

    More about this item

    Keywords

    Business cycles; Survey data; Learning; Disagreement; Monetary policy;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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