OeNB-Freitagsseminar with José Dorich

Assessing the importance of observed inflation expectations in inflation dynamics: a new approach

OeNB Freitagsseminar with José Dorich, Bank of Canada
We propose a new method to study the link between inflation expectations and inflation. First, we derive a theoretical relationship in which year-over-year inflation is a function of one-year ahead firms’ inflation expectations and a composite of unobserved terms. This relationship holds in many macroeconomic models and for alternative forecasting horizons. Then we use this relationship, US data and statistical methods to provide empirical evidence on the importance of observed firms’ inflation expectations in explaining inflation. Two results stand out. First, firms’ inflation expectations account for a quantitatively important share of the movements in inflation. Second, firms’ inflation expectations tend to explain a larger share of inflation variation than households’ and professional forecasters’ inflation expectations.

Date
Tuesday, April 16, 2024 | Start: 11.00 a.m. | End: 12.30 p.m.

Venue
The event is planned both, online via Webex and onsite at the Oesterreichische Nationalbank, Veranstaltungssaal, Otto-Wagner-Platz 3, 1090 Vienna

Please register by April 15, 2024, at the latest.