Medium- vs. short-term consumer inflation expectations : evidence from a new euro area survey

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Title: Medium- vs. short-term consumer inflation expectations : evidence from a new euro area survey
Author: Stanisławska, Ewa ; Paloviita, Maritta
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
Series number: 10/2021
Year of publication: 2021
Publication date: 29.6.2021
Pages: 38
Subject (yso): inflaatio; odotukset; euroalue; survey-tutkimus; kuluttajat
Keywords: mikrodata; inflaatio-odotukset
JEL: D12; D84; E31; E58
Other keywords: inflation expectations; consumer survey; micro-data
Abstract: Using the ECB Consumer Expectations Survey, this paper investigates how consumers revise medium-term inflation expectations. We provide robust evidence of their adjustment to the current economic developments. In particular, consumers adjust medium-term inflation views in response to changes in short-term inflation expectations and, to a lesser degree, to changes in perceptions of current inflation. We find that the strong adverse Covid-19 pandemic shock contributed to an increase in consumer inflation expectations. We show that consumers who declare high trust in the ECB adjust their medium-term inflation expectations to a lesser degree than consumers with low trust. Our results increase understanding of expectations formation, which is an important issue for medium-term oriented monetary policy.
Rights: https://helda.helsinki.fi/bof/copyright


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