Long-Run Inflation Expectations in the Shrinking Upper Tail

8 Pages Posted: 8 May 2019

See all articles by Carola Binder

Carola Binder

Haverford College - Department of Economics

Date Written: April 9, 2019

Abstract

Consumer inflation expectations are highly disperse, with some households reporting very high inflation forecasts. In recent years, disagreement in longer-run inflation expectations has fallen, reflecting compression in the upper part of the distribution. The 75th percentile of the distribution of longer-run inflation forecast has fallen 0.21 percentage points per year since 2012 and is at an all-time low. I show that the decline in long-run inflation expectations at the upper end of the distribution seems to reflect improvement in consumers' general economic sentiment, rather than stronger anchoring of inflation expectations.

Keywords: consumer expectations, inflation expectations, anchoring, disagreement

JEL Classification: D83, D84, E31, E52

Suggested Citation

Binder, Carola, Long-Run Inflation Expectations in the Shrinking Upper Tail (April 9, 2019). Available at SSRN: https://ssrn.com/abstract=3369262 or http://dx.doi.org/10.2139/ssrn.3369262

Carola Binder (Contact Author)

Haverford College - Department of Economics ( email )

Haverford, PA 19041
United States

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