Inflation and Deflationary Biases in Inflation Expectations

Research output: Working paperWorking papers

Authors

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.
Original languageEnglish
Place of PublicationWashington DC
PublisherBoard of Governors of the Federal Reserve System (US)
Number of pages51
DOIs
Publication statusPublished - 06.2019
Externally publishedYes

    Research areas

  • Economics - inflation bias, deflationary bias, confidence in central banks, trust, ZLB, inflation expectations, microdata

DOI

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  1. Carlos Vittar

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