{
  "title": "Expectations' Anchoring and Inflation Persistence",
  "publication": "IMF Working Papers, December 11, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/12/11/expectations-anchoring-and-inflation-persistence-46442",
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  "summary": "Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation.",
  "sections": [
    {
      "heading": "Objective and scope",
      "content": "- Provide an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation.\n- Construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989.\n- Study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates."
    },
    {
      "heading": "Methodology",
      "content": "- Novel index: constructed from survey-based inflation forecasts for 45 economies starting in 1989.\n- Shock identification: focus on terms-of-trade shocks and their effect on consumer price inflation.\n- Sample restriction: analysis concentrated on countries with flexible exchange rates."
    },
    {
      "heading": "Main findings",
      "content": "- Terms-of-trade shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored.\n- When expectations are strongly anchored:\n  - Inflation reacts by less to terms-of-trade shocks.\n  - Inflation returns quickly to its pre-shock level."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject areas: Foreign exchange, Monetary policy, Prices\n- Keywords: Anchoring, Commodity prices, commodity terms of trade index, commodity terms-of-trade shock, consumer price inflation, Consumer prices, credibility, exchange rate, Exchange rate arrangements, Inflation, inflation dynamics, inflation expectation, inflation expectations, inflation performance, inflation persistence, inflation surprise, Inflation targeting, terms of trade, terms-of-trade shock, WP\n\nSource: IMF Working Paper — \"Expectations' Anchoring and Inflation Persistence\" (Working Paper No. 2018/280, December 11, 2018).\n\n---\n\n Content in this bundle\n\n- Expectations' Anchoring and Inflation Persistence, WP/18/280, December 2018\n  - Expectations' Anchoring and Inflation Persistence, WP/18/280, December 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Expectations' Anchoring and Inflation Persistence, WP/18/280, December 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/12/11/expectations-anchoring-and-inflation-persistence-46442"
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    "Authors: Rudolfs Bems, Francesca Caselli, Francesco Grigoli, Bertrand Gruss, Weicheng Lian",
    "Published: December 11, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484388846.001",
    "Provide an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation.",
    "Construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989.",
    "Study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates.",
    "Novel index: constructed from survey-based inflation forecasts for 45 economies starting in 1989.",
    "Shock identification: focus on terms-of-trade shocks and their effect on consumer price inflation.",
    "Sample restriction: analysis concentrated on countries with flexible exchange rates.",
    "Terms-of-trade shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored.",
    "When expectations are strongly anchored:",
    "Subject areas: Foreign exchange, Monetary policy, Prices",
    "Keywords: Anchoring, Commodity prices, commodity terms of trade index, commodity terms-of-trade shock, consumer price inflation, Consumer prices, credibility, exchange rate, Exchange rate arrangements, Inflation, inflation dynamics, inflation expectation, inflation expectations, inflation performance, inflation persistence, inflation surprise, Inflation targeting, terms of trade, terms-of-trade shock, WP",
    "**Expectations' Anchoring and Inflation Persistence, WP/18/280, December 2018**"
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