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Factors Affecting Consumers’ Inflation Expectations in EU Members States with Independent Monetary Policy

In: Economic Development and Financial Markets

Author

Listed:
  • Magdalena Szyszko

    (WSB University in Poznan)

  • Aleksandra Rutkowska

    (Poznan University of Economics and Business)

Abstract

In the light of the research which proves that inflation expectations cannot be fully explained by inflation itself, a question about the possible drivers of expectations arises. In this paper, we look for such drivers with the use of the cointegration analysis. We assume that some economic information is incorporated into a mechanism that explains their changes and long-run development (1) and that the drivers of expectations vary across countries (2). The research covers eight non-euro area EU Member States and the time span of years 2001–2016. We distinguish six monetary, financial, and real sphere factors that could affect expectations, and we elaborate on VECMs for each country, respectively, to analyse short- and long-run dependence of variables. We find that long-run relations do exist between variables as well as—in certain cases—short-run relations. The number of variables and the lags suggested by the information criteria lead to relatively complex models, which means that they are difficult to interpret directly. As a result, we propose further research with respect to the same dataset.

Suggested Citation

  • Magdalena Szyszko & Aleksandra Rutkowska, 2020. "Factors Affecting Consumers’ Inflation Expectations in EU Members States with Independent Monetary Policy," Contributions to Economics, in: Adam Śliwiński & Persefoni Polychronidou & Anastasios Karasavvoglou (ed.), Economic Development and Financial Markets, pages 81-100, Springer.
    • Handle: RePEc:spr:conchp:978-3-030-32426-1_5
    DOI: 10.1007/978-3-030-32426-1_5
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