The Evolution of the Anchoring of Inflation Expectations

29 Pages Posted: 29 Apr 2016  

Ines Buono

Bank of Italy

Sara Formai

Bank of Italy

Date Written: March 18, 2016

Abstract

We investigate the degree of anchoring in inflation expectations for different advanced economies using data from professional forecasters' surveys. We define expectations as anchored when movements in short-run expectations do not trigger movements in expectations at longer horizons. Using time-varying parameter regressions, we provide evidence that anchoring has varied noticeably across economies and over time. In particular, we find that starting from the second half of 2008, inflation expectations in the euro area, unlike in the US and in the UK, have shown signs of a de-anchoring.

Keywords: anchoring, inflation expectations, nonparametric estimation

JEL Classification: E31, E52, D84, C14

Suggested Citation

Buono, Ines and Formai, Sara, The Evolution of the Anchoring of Inflation Expectations (March 18, 2016). Bank of Italy Occasional Paper No. 321. Available at SSRN: https://ssrn.com/abstract=2772509 or http://dx.doi.org/10.2139/ssrn.2772509

Ines Buono (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Sara Formai

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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