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Determinants of households' inflation expectations in Japan and the United States

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  • Ueda, Kozo

Abstract

Using a VAR model that includes survey data on households' inflation expectations for Japan and the US, we investigate their determinants and influences on the economy and compare their properties in two countries. Short-term non-recursive restrictions are imposed taking account of simultaneous co-dependence between realized and expected inflation. We find that responding to changes in exogenous prices and to monetary policy shocks, inflation expectations adjust more quickly than does realized inflation. Compared with Japan, the effects of exogenous prices on inflation and inflation expectations in the US are not only large but also long lasting and shocks to expectations have self-fulfilling effects on inflation.

Suggested Citation

  • Ueda, Kozo, 2010. "Determinants of households' inflation expectations in Japan and the United States," Journal of the Japanese and International Economies, Elsevier, vol. 24(4), pages 503-518, December.
  • Handle: RePEc:eee:jjieco:v:24:y:2010:i:4:p:503-518
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:jjieco:v:46:y:2017:i:c:p:53-68 is not listed on IDEAS
    2. Piazza, Roberto, 2016. "Self-fulfilling deflations," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 18-40.
    3. Sane, Renuka, 2017. "Stock Market Participation in the Aftermath of an Accounting Scandal," Working Papers 17/198, National Institute of Public Finance and Policy.
    4. Gabriel Caldas Montes & Rodolfo Tomás da Fonseca Nicolay, 2015. "Central bank’s perception on inflation and inflation expectations of experts: Empirical evidence from Brazil," Journal of Economic Studies, Emerald Group Publishing, vol. 42(6), pages 1142-1158, November.
    5. Andreou, Elena & Eminidou, Snezana & Zachariadis, Marios, 2016. "Inflation expectations and monetary policy in Europe," CEPR Discussion Papers 11306, C.E.P.R. Discussion Papers.
    6. Hattori, Masazumi & Yetman, James, 2017. "The evolution of inflation expectations in Japan," Journal of the Japanese and International Economies, Elsevier, pages 53-68.
    7. Shioji, Etsuro, 2015. "Time varying pass-through: Will the yen depreciation help Japan hit the inflation target?," Journal of the Japanese and International Economies, Elsevier, pages 43-58.
    8. Snezana Eminidou & Marios Zachariadis & Elena Andreou, 2017. "Inflation Expectations and Monetary Policy Surprises," 2017 Meeting Papers 919, Society for Economic Dynamics.
    9. repec:eee:jjieco:v:45:y:2017:i:c:p:13-26 is not listed on IDEAS
    10. Taniya Ghosh & Sohini Sahu & Siddhartha Chattopadhyay, 2017. "Households' Inflation Expectations in India: Role of Economic Policy Uncertainty and Global Financial Uncertainty Spill-over," Working Papers id:11890, eSocialSciences.
    11. Vipul Bhatt & Masao Ogaki & Yuichi Yaguchi, 2014. "A Reformulation of Normative Economics for Models with Endogenous Preferences," IMES Discussion Paper Series 14-E-02, Institute for Monetary and Economic Studies, Bank of Japan.
    12. Roberto Piazza, 2015. "Deflation expectations and Japan's lost decade," Questioni di Economia e Finanza (Occasional Papers) 274, Bank of Italy, Economic Research and International Relations Area.

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