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Recent Developments in Measuring Inflation Expectations: With a Focus on Market-based Inflation Expectations and the Term Structure of Inflation Expectations

Author

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  • Ko Adachi

    (Bank of Japan)

  • Kazuhiro Hiraki

    (Bank of Japan)

Abstract

Economic surveys and the market price of inflation-linked assets are two major sources for gauging inflation expectations. Recent studies have developed methodologies that use various indicators to estimate underlying inflation expectations and their term structure. This article reviews recent research on inflation expectations, with a focus on Hiraki and Hirata's (2020) study on market-based inflation expectations, and Maruyama and Suganuma's (2019) study on the term structure of inflation expectations. We also describe recent movements in inflation expectations in Japan. Overall, inflation expectations weakened somewhat after the outbreak of COVID-19 in early 2020, but they have been more or less unchanged in recent months. Given the great uncertainty over the consequences of COVID-19 and their impact on domestic and overseas economies, future developments in inflation expectations will also continue to be highly uncertain. It is therefore important to continue monitoring the various indicators of inflation expectations by considering their characteristics.

Suggested Citation

  • Ko Adachi & Kazuhiro Hiraki, 2021. "Recent Developments in Measuring Inflation Expectations: With a Focus on Market-based Inflation Expectations and the Term Structure of Inflation Expectations," Bank of Japan Research Laboratory Series 21-E-1, Bank of Japan.
    • Handle: RePEc:boj:bojlab:lab21e01
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    File URL: https://www.boj.or.jp/en/research/wps_rev/lab/lab21e01.htm
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    Cited by:

    1. NAKAJIMA, Jouchi, 2023. "Estimation of firms' inflation expectations using the survey DI," Discussion Paper Series 749, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Keywords

    Inflation expectations; Survey-based inflation expectations; Breakeven inflation rate;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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