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Inflation expectations in the euro area: Are consumers rational?

  • Francisco Craveiro Dias
  • Cláudia Duarte
  • António Rua

In this paper, we propose a quantitative measure for inflation expectations based on consumer survey data. Thereafter, we proceed to testing the rationality assumption. This issue is of noteworthy interest in its own as it is commonly assumed in the theoretical modelling literature that the rational expectations hypothesis holds. This analysis is conducted for the euro area as a whole, as well as for several member countries, using a sample covering the last two decades. Moreover, we also assess if the conclusions hold when one focuses on the post-euro introduction period.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200823.

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Date of creation: 2008
Date of revision:
Handle: RePEc:ptu:wpaper:w200823
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  18. Batchelor, Roy A & Orr, Adrian B, 1988. "Inflation Expectations Revisited," Economica, London School of Economics and Political Science, vol. 55(219), pages 317-31, August.
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