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Why do we think that inflation expectations matter for inflation? (And should we?)

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  • Jeremy B. Rudd

Abstract

Economists and economic policymakers believe that households’ and firms’ expectations of future inflation are a key determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on extremely shaky foundations, and a case is made that adhering to it uncritically could easily lead to serious policy errors.

Suggested Citation

  • Jeremy B. Rudd, 2022. "Why do we think that inflation expectations matter for inflation? (And should we?)," Review of Keynesian Economics, Edward Elgar Publishing, vol. 10(1), pages 25-45, January.
    • Handle: RePEc:elg:rokejn:v:10:y:2022:i:1:p25-45
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    Citations

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    Cited by:

    1. Andriantomanga, Zo, 2023. "The role of survey-based expectations in real-time forecasting of US inflation," MPRA Paper 119904, University Library of Munich, Germany.
    2. Lukas Buchheim & Sebastian Link & Sascha Möhrle, 2024. "Inflation and Wage Expectations of Firms and Employees," CESifo Working Paper Series 11329, CESifo.
    3. Ferri, Piero & Cristini, Annalisa & Tramontana, Fabio, 2023. "Meta-models of the Phillips curve and income distribution," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 215-232.
    4. David A. Comerford, 2024. "Response Bias in Survey Measures of Expectations: Evidence from the Survey of Consumer Expectations’ Inflation Module," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(4), pages 933-953, June.
    5. Mariño, Eduardo Anthony G. & Marszalec, Daniel, 2023. "Strategic supply management and mechanism choice in government debt auctions: An empirical analysis from the Philippines," Journal of Banking & Finance, Elsevier, vol. 154(C).
    6. Mohammad Naim Azimi & Mohammad Mafizur Rahman, 2024. "Examining the environmental Phillips curve hypothesis in G7 nations: critical insights from wavelet coherence and wavelet causality analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(6), pages 5683-5713, December.
    7. Korenok, Oleg & Munro, David, 2024. "The Rockets and Feathers of Inflation Attention," GLO Discussion Paper Series 1463, Global Labor Organization (GLO).

    More about this item

    Keywords

    inflation dynamics; wage determination;

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