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Disagreement about Inflation Expectations

Author

Listed:
  • Alexander Ballantyne

    (Reserve Bank of Australia)

  • Christian Gillitzer

    (Reserve Bank of Australia)

  • David Jacobs

    (Reserve Bank of Australia)

  • Ewan Rankin

    (Reserve Bank of Australia)

Abstract

Average and median measures of inflation expectations can disguise substantial disagreement in expectations. Disagreement in expectations has important implications for anchoring of inflation expectations and central bank credibility. We use individual response data from five survey measures of inflation expectations to document five features of disagreement about inflation expectations in Australia: (1) there has been a decline in disagreement since the introduction of inflation targeting, except among consumers; (2) disagreement responds little to most macroeconomic news surprises; (3) disagreement among consumers is much larger than among professional forecasters; (4) disagreement and the mean level of inflation expectations co-move for consumers but not professional forecasters; (5) there appear to be persistent differences in consumer inflation expectations across different demographic groups. For professional forecasters, the reduction in the overall level of disagreement and unresponsiveness of disagreement to most macroeconomic news surprises is consistent with well-anchored inflation expectations.

Suggested Citation

  • Alexander Ballantyne & Christian Gillitzer & David Jacobs & Ewan Rankin, 2016. "Disagreement about Inflation Expectations," RBA Research Discussion Papers rdp2016-02, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2016-02
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    File URL: https://www.rba.gov.au/publications/rdp/2016/pdf/rdp2016-02.pdf
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    References listed on IDEAS

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    Cited by:

    1. Juan Camilo Anzoátegui-Zapata & Juan Camilo Galvis-Ciro, 2020. "Disagreements in Consumer Inflation Expectations: Empirical Evidence for a Latin American Economy," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 16(2), pages 99-122, November.
    2. Benjamin Beckers & Anthony Brassil, 2022. "Inflation Expectations in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(1), pages 125-135, March.
    3. Dzmitry Kruk, 2016. "SVAR Approach for Extracting Inflation Expectations Given Severe Monetary Shocks: Evidence from Belarus," BEROC Working Paper Series 39, Belarusian Economic Research and Outreach Center (BEROC).
    4. Ruttachai Seelajaroen & Pornanong Budsaratragoon & Boonlert Jitmaneeroj, 2020. "Do monetary policy transparency and central bank communication reduce interest rate disagreement?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(3), pages 368-393, April.
    5. Juan Camilo Galvis Ciro & Juan Camilo Anzoátegui Zapata, 2019. "Disagreement in inflation expectations: empirical evidence for Colombia," Applied Economics, Taylor & Francis Journals, vol. 51(40), pages 4411-4424, August.

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    More about this item

    Keywords

    inflation expectations; disagreement; dispersion; information rigidity;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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