Assessing the (de-)anchoring of households’ long-term inflation expectations in the US |
| |
| Institution: | 1. Department of Economics & Business Environment, Indian Institute of Management Raipur, Raipur, Chhattisgarh 493661, India;2. Department of Finance & Strategy, T A Pai Management Institute, Manipal, Karnataka 576104, India;1. Centro de Estudios Económicos, El Colegio de México, Camino al Ajusco 20, Col. Pedregal de Santa Teresa, Mexico City, 10740, Mexico;2. Department of Economics, University of Reading, Whiteknights, PO Box 218, Reading, RG6 6AA, United Kingdom;3. Dirección General de Investigación Económica, Banco de México, Calle 5 de Mayo 18, Col. Centro, Mexico City, 06069, Mexico;1. Lehigh University and DePauw University, 621 Taylor Street, Bethlehem, PA United States;2. Lehigh University, 621 Taylor Street, Bethlehem, PA United States;3. Department of Economics, The University of Texas at Dallas, 800 W. Campbell Rd GR 31, Richardson, TX 75080, United States;1. Deusto Business School, University of Deusto, P° Mundaiz 50, 20012 Donostia-San Sebastián, Spain;2. Department of Economics, University of Washington, Seattle, WA 98195, United States;1. Otho Smith Professor of Economics, University of Mississippi, Box 1848, University, MS 38677, United States;2. Department of Economics, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467, United States |
| |
| Abstract: | Well-anchored inflation expectations play an important role in the achievement of price stability. The (de-)anchoring of long-term inflation expectations in the US has been under debate since the sub-prime crisis. This paper assesses and explains the evolution of the degree of (de-)anchorage of households’ long-term inflation expectations in the US during the period of 1990 to 2019, in a time-varying framework. We find the long-term inflation expectations to be de-anchored during the entire study period. The de-anchorage was greater in the first half of the 1990s. Subsequently, it has declined but has not yet anchored. An increase in inflation perception reduces the degree of de-anchorage in a (persistently) low-inflation perception period, whereas it causes a rise in the degree of de-anchorage when inflation perception is around its long-term average or is persistently high. Further, a rise in economic policy uncertainty also increases the de-anchorage of households’ long-term inflation expectations. This suggests that the Federal Reserve System (Fed) may find it beneficial to pay more attention to households’ inflation perception. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
