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Effective Use of Survey Information in Estimating the Evolution of Expected Inflation

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  • SHARON KOZICKI
  • P. A. TINSLEY

Abstract

The evolution of the term structure of expected U.S. inflation is modeled using survey data to provide timely information on structural change not contained in lagged inflation data. To capture shifts in subjective perceptions, the model is adaptive to long‐horizon survey expectations. However, even short‐horizon survey expectations inform shifting‐endpoint estimates that capture the lag between inflation and the perceived inflation target, which anchors inflation expectations. Results show movements of the perceived target are an important source of inflation persistence and suggest historical U.S. monetary policy was not fully credible for much of the postwar sample.

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  • Sharon Kozicki & P. A. Tinsley, 2012. "Effective Use of Survey Information in Estimating the Evolution of Expected Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(1), pages 145-169, February.
    • Handle: RePEc:wly:jmoncb:v:44:y:2012:i:1:p:145-169
    DOI: 10.1111/j.1538-4616.2011.00471.x
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