Working Paper: CEPR ID: DP17850
Authors: Ricardo Reis
Abstract: With the profusion of measures of expected inflation (from market prices and from surveys of households, firms, and professionals) it is a mistake to focus on a single one while ignoring the others. This paper discusses four common arguments for a single focus, and finds each of them to be lacking. In the process, it isolates characteristics of different measures that models that combine them should take into account.
Keywords: Phillips curve; monetary policy
JEL Codes: E31; E52; D84
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firms' expectations (D84) | Inflation dynamics (E31) |
| Costs faced by firms (D21) | Firms' expectations (D84) |
| Workers' expectations (J29) | Costs faced by firms (D21) |
| Financial market expectations (G19) | Costs faced by firms (D21) |
| Household expectations (D19) | Inflation outcomes (E31) |
| Firms' expectations (D84) | Costs faced by firms (D21) |
| Financial market expectations (G19) | Inflation dynamics (E31) |
| Policymakers' focus on financial market expectations (G18) | Overlooking household expectations (D13) |