Research Repository

Inflation and Deflationary Biases in Inflation Expectations

Lamla, Michael and PJaifar, Damian and Rendell, Lea (2019) Inflation and Deflationary Biases in Inflation Expectations. Working Paper. Essex Finance Centre Working Papers. (Unpublished)

[img]
Preview
Text
48_ML_title.pdf

Download (650kB) | Preview

Abstract

We explore the consequences of losing confidence in the price-stability objective of central banks by quantifying the inflation and deflationary biases in inflation expectations. In a model with an occasionally binding zero-lower-bound constraint, we show that both inflation bias and deflationary bias can exist as a steady-state outcome. We assess the predictions of this model using unique individual-level inflation expectations data across nine countries that allow for a direct identification of these biases. Both inflation and deflationary biases are present and sizable, but different across countries. Even among the euro-area countries, perceptions of the European Central Bank’s objectives are very distinct.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: inflation bias, deflationary bias, confidence in central banks, trust, effective lower bound, inflation expectations, microdata.
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Depositing User: Elements
Date Deposited: 07 Jun 2019 08:39
Last Modified: 11 Nov 2019 22:15
URI: http://repository.essex.ac.uk/id/eprint/24771

Actions (login required)

View Item View Item