How to limit the spillover from an inflation surge to inflation expectations?

Research output: Contribution to journal › Article › Research › peer review

Authors

  • Lena Dräger
  • Michael J. Lamla
  • Damjan Pfajfar

Research Organisations

External Research Organisations

  • Munich Society for the Promotion of Economic Research - CESifo GmbH
  • University of Duisburg-Essen
  • ETH Zurich
  • Federal Reserve Bank
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Details

Original languageEnglish
Article number103546
JournalJournal of Monetary Economics
Volume144
Early online date19 Dec 2023
Publication statusPublished - May 2024

Abstract

Using a randomized control trial on German consumers we show that information about rising inflation increases inflation expectations. This initial increase in expectations can be mitigated by providing forecasts of inflation. Information about (future) inflation affects the whole term structure of inflation expectations, where the effects are smaller for longer-run expectations. This information also causes changes in consumption and savings decisions. In subsequent months—when consumers realize that inflation is much higher than the provided forecasts—they reverse the reliance on information about inflation forecasts and rely again more on their initial priors.

Keywords

    Inflation surge, Randomized control trial, Short-run and long-run inflation expectations, Survey experiment

ASJC Scopus subject areas

Cite this

How to limit the spillover from an inflation surge to inflation expectations? / Dräger, Lena; Lamla, Michael J.; Pfajfar, Damjan.
In: Journal of Monetary Economics, Vol. 144, 103546, 05.2024.

Research output: Contribution to journal › Article › Research › peer review

Dräger L, Lamla MJ, Pfajfar D. How to limit the spillover from an inflation surge to inflation expectations? Journal of Monetary Economics. 2024 May;144:103546. Epub 2023 Dec 19. doi: 10.1016/j.jmoneco.2023.12.004
Dräger, Lena ; Lamla, Michael J. ; Pfajfar, Damjan. / How to limit the spillover from an inflation surge to inflation expectations?. In: Journal of Monetary Economics. 2024 ; Vol. 144.
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