The author would like to thank John Hutton, Dimitar Kostov, Andrew Levin, Athanasios Orphanides, Ricardo Reis, Frank Smets, Gabriel Talmain, and two anonymous referees for valuable comments.
ARE LONG-TERM INFLATION EXPECTATIONS WELL-ANCHORED? EVIDENCE FROM THE EURO AREA AND THE UNITED STATES
Version of Record online: 1 NOV 2012
© 2012 The Authors. Bulletin of Economic Research © 2012 Board of Trustees of the Bulletin of Economic Research and John Wiley & Sons Ltd
Bulletin of Economic Research
Volume 67, Issue 1, pages 65–82, January 2015
How to Cite
Tsenova, T. (2015), ARE LONG-TERM INFLATION EXPECTATIONS WELL-ANCHORED? EVIDENCE FROM THE EURO AREA AND THE UNITED STATES. Bulletin of Economic Research, 67: 65–82. doi: 10.1111/j.1467-8586.2012.00474.x
- Issue online: 21 JAN 2015
- Version of Record online: 1 NOV 2012
- collective bias;
- forecast news;
- imperfect knowledge;
- monetary policy;
This paper analyses the stability of long-term inflation expectations and uncertainty, based on their sensitivity to innovations to observed inflation, short- and medium-term forecast news. News is defined in a subjective sense and derived from revisions to shorter-term fixed-target forecasts. The assessment tests for presence of non-linear effects, including regime changes during disinflation in the USA in the 1990s and the recent financial crisis. Stability is also investigated in terms of level evolution, based on a structural non-linear and non-Gaussian learning model to uncover the presence of a common trend underlying the long-term dynamics of inflation, individual expectations, and uncertainty.