Biases in Survey Inflation Expectations: Evidence from the Euro Area
IMF Working Papers, September 30, 2022
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- Biases in Survey Inflation Expectations: Evidence from the Euro Area
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Bibliographic details
- Authors: Jiaqian Chen, Lucyna Gornicka, Vaclav Zdarek
- Published: September 30, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400204401.001
Key findings: five documented facts
- Individual inflation forecasts overreact to individual news.
- The cross-section average of individual forecasts of inflation underreacts to shocks initially, but overreacts in the medium term.
- Disagreement about future inflation increases in response to news when the current inflation is high, and declines when inflation is low, consistent with a zero lower bound of expectations.
- Overreaction of individual inflation forecasts to news increased after the global financial crisis (GFC).
- The reaction of average expectations (and of actual inflation) to shocks became more muted post-GFC in the euro area, but not in the U.S.
Subject areas and keywords
- Subject: Economic forecasting; Economic theory; Financial services; Inflation; Oil production; Prices; Production; Supply shocks; Zero lower bound
- Keywords: expectations formation; forecasts of inflation; Global; Inflation; inflation expectation; informational rigidities; Oil production; responses of inflation expectation; Supply shocks; survey inflation expectation; surveys of expectations; Zero lower bound
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- Working Paper