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Household inflation expectations and inflation dynamics

  • Péter Gábriel

    ()

    (Magyar Nemzeti Bank)

Although in modern monetary economics it is usually assumed that inflation expectations play a prominent role when economic agents set prices and wages, the empirical evidence for this link is scarce. This paper aims to identify the effect of changes in inflation expectations on prices and wages in an SVAR framework for three inflation targeting countries (Czech Republic, Hungary and United Kingdom). The results show that in all countries the effect is significant. In comparison with the United Kingdom and the Czech Republic, inflation expectations in Hungary are more volatile and less anchored, which can be an important source of the high volatility of the inflation rate.

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File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbfuzetek/WP_2010_12.pdf
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Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2010/12.

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Length: 29 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:mnb:wpaper:2010/12
Contact details of provider: Web page: http://www.mnb.hu/

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  1. Orphanides, Athanasios & Williams, John C, 2005. "The Decline of Activist Stabilization Policy: Natural Rate Misperceptions, Learning and Expectations," CEPR Discussion Papers 4865, C.E.P.R. Discussion Papers.
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  11. Konstantins Benkovskis, 2008. "The Role of Inflation Expectations in the New EU Member States: Consumer Survey Based Results," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(07-08), pages 298-317, Oktober.
  12. Ang, Andrew & Bekaert, Geert & Wei, Min, 2007. "Do macro variables, asset markets, or surveys forecast inflation better?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1163-1212, May.
  13. Balcombe, Kelvin, 1996. "The Carlson-Parkin method applied to NZ price expectations using QSBO survey data," Economics Letters, Elsevier, vol. 51(1), pages 51-57, April.
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