Inflation Expectations in the Euro Area: Indicators, Analyses and Models Used at Banca d’Italia

28 Pages Posted: 24 May 2021

Date Written: March 18, 2021

Abstract

This paper illustrates the tools used at Banca d’Italia (BI) to monitor the evolution of inflation expectations. The paper also surveys the analyses conducted at BI to assess how inflation expectations affect agents’ choices and the economy. The first part discusses the measures of inflation expectations derived from the prices of inflation-linked financial instruments and from the surveys of professional forecasters. The second part focuses on the measures of households’ and firms’ inflation expectations collected by BI, along with analyses presenting empirical evidence that expectations do indeed drive agents’ economic choices. The last part analyses the overall effect of exogenous changes of inflation expectations on the real economy, through the lens of the macroeconomic models used at BI.

Keywords: inflation expectations, anchoring, surveys

JEL Classification: E31, E32

Suggested Citation

Cecchetti, Sara and Fantino, Davide and Riggi, Marianna and Notarpietro, Alessandro and Tagliabracci, Alex and Tiseno, Andrea and Zizza, Roberta, Inflation Expectations in the Euro Area: Indicators, Analyses and Models Used at Banca d’Italia (March 18, 2021). Bank of Italy Occasional Paper No. 612, Available at SSRN: https://ssrn.com/abstract=3852256 or http://dx.doi.org/10.2139/ssrn.3852256

Sara Cecchetti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Davide Fantino (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Roma, 00184
Italy

Marianna Riggi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Notarpietro

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alex Tagliabracci

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Andrea Tiseno

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Roberta Zizza

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

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