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Effects of Inflation Expectations on Inflation

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  • Richhild Moessner

Abstract

We study the effects of professionals’ survey-based inflation expectations on inflation for a large number of 36 OECD economies, using dynamic cross-country panel estimation of New-Keynesian Phillips curves. We find that inflation expectations have a significantly positive effect on inflation. We also find that the effect of inflation expectations on inflation is larger when inflation is higher. This suggests that second-round effects via the effects of higher inflation expectations on inflation are more relevant in a high-inflation environment.

Suggested Citation

  • Richhild Moessner, 2021. "Effects of Inflation Expectations on Inflation," CESifo Working Paper Series 9467, CESifo.
    • Handle: RePEc:ces:ceswps:_9467
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    References listed on IDEAS

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    8. Gabriela Galati & Steven Poelhekke & Chen Zhou, 2011. "Did the Crisis Affect Inflation Expectations?," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 167-207, March.
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    11. Jašová, Martina & Moessner, Richhild & Takáts, Előd, 2020. "Domestic and global output gaps as inflation drivers: What does the Phillips curve tell?," Economic Modelling, Elsevier, vol. 87(C), pages 238-253.
    12. Levin, Andrew T. & Moessner, Richhild, 2005. "Inflation persistence and monetary policy design: an overview," Working Paper Series 539, European Central Bank.
    13. Smets, Frank, 2003. "Maintaining price stability: how long is the medium term?," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1293-1309, September.
    14. Martina Jašová & Richhild Moessner & Elöd Takáts, 2019. "Exchange Rate Pass-Through: What Has Changed Since the Crisis?," International Journal of Central Banking, International Journal of Central Banking, vol. 15(3), pages 27-58, September.
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    Cited by:

    1. Carola Conces Binder & Rodrigo Sekkel, 2023. "Central Bank Forecasting: A Survey," Staff Working Papers 23-18, Bank of Canada.
    2. Boris Hofmann & Dora Xia, 2022. "Quantitative forward guidance through interest rate projections," BIS Working Papers 1009, Bank for International Settlements.
    3. Richhild Moessner, 2022. "Determinants of Inflation Expectations in the Euro Area," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(2), pages 99-102, March.
    4. Degiannakis, Stavros & Filis, George, 2023. "Oil price assumptions for macroeconomic policy," Energy Economics, Elsevier, vol. 117(C).
    5. Kent Matthews & Kian Ong, 2022. "Is inflation caused by deteriorating inflation expectations or excessive monetary growth?," Economic Affairs, Wiley Blackwell, vol. 42(2), pages 259-274, June.
    6. Richhild Moessner, 2021. "Determinants of Inflation Expectations," CESifo Working Paper Series 9485, CESifo.

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    More about this item

    Keywords

    inflation; inflation expectations; Phillips curve;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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