Disagreement about Inflation Expectations

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Disagreement about Inflation Expectations

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Title: Disagreement about Inflation Expectations
Author: Reis, Ricardo; Mankiw, N; Wolfers, Justin

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Citation: Mankiw, N. Gregory, Ricardo Reis, and Justin Wolfers. 2003. Disagreement about inflation expectations. Harvard Institute of Economic Research Working Papers 2011.
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Abstract: Analyzing 50 years of inflation expectations data from several sources, we document substantial disagreement among both consumers and professional economists about expected future inflation. Moreover, this disagreement shows substantial variation through time, moving with inflation, the absolute value of the change in inflation, and relative price variability. We argue that a satisfactory model of economic dynamics must speak to these important business cycle moments. Noting that most macroeconomic models do not endogenously generate disagreement, we show that a simple sticky-information' model broadly matches many of these facts. Moreover, the sticky-information model is consistent with other observed departures of inflation expectations from full rationality, including autocorrelated forecast errors and insufficient sensitivity to recent macroeconomic news.
Published Version: http://ideas.repec.org/p/fth/harver/2011.html
Other Sources: http://gsbapps.stanford.edu/researchpapers/library/RP1807.pdf
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:2770511
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