Inflation Expectations and Inflation Uncertainty

An understanding of how inflation expectations are formed is of utmost importance for the analysis and conduct of monetary policy. It is a well established fact that inflation expectations and realized inflation both show a high degree of persistence. Another stylized fact that has been received more attention during recent years is that surveys on inflation expectations reveal highly diverging beliefs across panellists. Frequently the latter phenomenon is interpreted as an indication for inflation uncertainty. This project intends to provide evidence on the characteristics and dynamics of inflation expectations as well as on the nature and causes of inflation uncertainty.

The project’s focus rests on the empirical analysis of the issues described above. Main parts of the project use different survey data sets on inflation expectations of households or professional forecasters. The project should be seen as background research for the further theoretical development of general equilibrium models of the New Keynesian type.