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Olivier Coibion - One of the best experts on this subject based on the ideXlab platform.
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Inflation Expectations as a policy tool
Journal of International Economics, 2020Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Saten Kumar, Mathieu PedemonteAbstract:Abstract We assess the prospects for central banks using Inflation Expectations as a policy tool for stabilization purposes. We review recent work on how Expectations of agents are formed and how they affect their economic decisions. Empirical evidence suggests that Inflation Expectations of households and firms affect their actions but the underlying mechanisms remain unclear, especially for firms. Two additional limitations prevent policy-makers from being able to actively manage Inflation Expectations. First, available surveys of firms' Expectations are systematically deficient, which can only be addressed through the creation of large, nationally representative surveys of firms. Second, neither households' nor firms' Expectations respond much to monetary policy announcements in low-Inflation environments. We provide suggestions for how monetary policy-makers could pierce this veil of inattention through new communication strategies as well as the potential pitfalls to trying to do so.
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Inflation Expectations and firm decisions new causal evidence
Quarterly Journal of Economics, 2020Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Tiziano RopeleAbstract:Author(s): Coibion, O; Gorodnichenko, Y; Ropele, T | Abstract: © 2019 The Author(s). We use a unique design feature of a survey of Italian firms to study the causal effect of Inflation Expectations on firms' economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent Inflation whereas other firms are not. This information treatment generates exogenous variation in Inflation Expectations. We find that higher Inflation Expectations on the part of firms leads them to raise their prices, increase demand for credit, and reduce their employment and capital. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
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Inflation Expectations as a Policy Tool
2019Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Saten Kumar, Mathieu PedemonteAbstract:We assess whether central banks may use Inflation Expectations as a policy tool for stabilization purposes. We review recent work on how Expectations of agents are formed and how they affect their economic decisions. Empirical evidence suggests that Inflation Expectations of households and firms affect their actions but the underlying mechanisms remain unclear, especially for firms. Two additional limitations prevent policy-makers from being able to actively manage Inflation Expectations. First, available surveys of firms’ Expectations are systematically deficient, which can only be addressed through the creation of large, nationally representative surveys of firms. Second, neither households’ nor firms’ Expectations respond much to monetary policy announcements in low-Inflation environments. We provide suggestions for how monetary policy-makers can pierce this veil of inattention through new communication strategies. At this stage, there remain a number of implementation issues and open research questions that need to be addressed to enable central banks to use Inflation Expectations as a policy tool. (This abstract was borrowed from another version of this item.)
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Inflation Expectations and firm decisions new causal evidence
Social Science Research Network, 2018Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Tiziano RopeleAbstract:We use a unique design feature of a survey of Italian firms to study the causal effect of Inflation Expectations on firms’ economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent Inflation whereas other firms are not. This information treatment generates exogenous variation in Inflation Expectations. We find that higher Inflation Expectations on the part of firms leads them to raise their prices, increase demand for credit, and reduce their employment and capital. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
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Inflation Expectations and firm decisions new causal evidence
Research Papers in Economics, 2018Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Tiziano RopeleAbstract:We use a unique design feature of a survey of Italian firms to study the causal effect of Inflation Expectations on firms' economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent Inflation (or the European Central Bank's Inflation target) whereas other firms are not. This information treatment generates exogenous variation in Inflation Expectations. We find that higher Inflation Expectations on the part of firms leads them to raise their prices, increase their utilization of credit, and reduce their employment. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
Boragan S Aruoba - One of the best experts on this subject based on the ideXlab platform.
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term structures of Inflation Expectations and real interest rates
Research Papers in Economics, 2016Co-Authors: Boragan S AruobaAbstract:Revised September 2016. In this paper, I use a statistical model to combine various surveys to produce a term structure of Inflation Expectations--Inflation Expectations at any horizon--and an associated term structure of real interest rates. Inflation Expectations extracted from this model track realized Inflation quite well, and in terms of forecast accuracy, they are at par with or superior to some popular alternatives. Looking at the period 2008.2015, I conclude that long-run Inflation Expectations remained anchored, and the policies of the Federal Reserve provided a large level of monetary stimulus to the economy.
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term structures of Inflation Expectations and real interest rates
Journal of Business & Economic Statistics, 2016Co-Authors: Boragan S AruobaAbstract:I use a statistical model to combine various surveys to produce a term structure of Inflation Expectations—Inflation Expectations at any horizon—and an associated term structure of real interest ra...
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term structures of Inflation Expectations and real interest rates
Social Science Research Network, 2016Co-Authors: Boragan S AruobaAbstract:In this paper, I use a statistical model to combine various surveys to produce a term structure of Inflation Expectations - Inflation Expectations at any horizon - and an associated term structure of real interest rates. Inflation Expectations extracted from this model track realized Inflation quite well, and in terms of forecast accuracy, they are at par with or superior to some popular alternatives. Looking at the period 2008.2015, I conclude that long-run Inflation Expectations remained anchored, and the policies of the Federal Reserve provided a large level of monetary stimulus to the economy.
Yuriy Gorodnichenko - One of the best experts on this subject based on the ideXlab platform.
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Inflation Expectations as a policy tool
Journal of International Economics, 2020Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Saten Kumar, Mathieu PedemonteAbstract:Abstract We assess the prospects for central banks using Inflation Expectations as a policy tool for stabilization purposes. We review recent work on how Expectations of agents are formed and how they affect their economic decisions. Empirical evidence suggests that Inflation Expectations of households and firms affect their actions but the underlying mechanisms remain unclear, especially for firms. Two additional limitations prevent policy-makers from being able to actively manage Inflation Expectations. First, available surveys of firms' Expectations are systematically deficient, which can only be addressed through the creation of large, nationally representative surveys of firms. Second, neither households' nor firms' Expectations respond much to monetary policy announcements in low-Inflation environments. We provide suggestions for how monetary policy-makers could pierce this veil of inattention through new communication strategies as well as the potential pitfalls to trying to do so.
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Inflation Expectations and firm decisions new causal evidence
Quarterly Journal of Economics, 2020Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Tiziano RopeleAbstract:Author(s): Coibion, O; Gorodnichenko, Y; Ropele, T | Abstract: © 2019 The Author(s). We use a unique design feature of a survey of Italian firms to study the causal effect of Inflation Expectations on firms' economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent Inflation whereas other firms are not. This information treatment generates exogenous variation in Inflation Expectations. We find that higher Inflation Expectations on the part of firms leads them to raise their prices, increase demand for credit, and reduce their employment and capital. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
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Inflation Expectations as a Policy Tool
2019Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Saten Kumar, Mathieu PedemonteAbstract:We assess whether central banks may use Inflation Expectations as a policy tool for stabilization purposes. We review recent work on how Expectations of agents are formed and how they affect their economic decisions. Empirical evidence suggests that Inflation Expectations of households and firms affect their actions but the underlying mechanisms remain unclear, especially for firms. Two additional limitations prevent policy-makers from being able to actively manage Inflation Expectations. First, available surveys of firms’ Expectations are systematically deficient, which can only be addressed through the creation of large, nationally representative surveys of firms. Second, neither households’ nor firms’ Expectations respond much to monetary policy announcements in low-Inflation environments. We provide suggestions for how monetary policy-makers can pierce this veil of inattention through new communication strategies. At this stage, there remain a number of implementation issues and open research questions that need to be addressed to enable central banks to use Inflation Expectations as a policy tool. (This abstract was borrowed from another version of this item.)
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Inflation Expectations and firm decisions new causal evidence
Social Science Research Network, 2018Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Tiziano RopeleAbstract:We use a unique design feature of a survey of Italian firms to study the causal effect of Inflation Expectations on firms’ economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent Inflation whereas other firms are not. This information treatment generates exogenous variation in Inflation Expectations. We find that higher Inflation Expectations on the part of firms leads them to raise their prices, increase demand for credit, and reduce their employment and capital. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
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Inflation Expectations and firm decisions new causal evidence
Research Papers in Economics, 2018Co-Authors: Olivier Coibion, Yuriy Gorodnichenko, Tiziano RopeleAbstract:We use a unique design feature of a survey of Italian firms to study the causal effect of Inflation Expectations on firms' economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent Inflation (or the European Central Bank's Inflation target) whereas other firms are not. This information treatment generates exogenous variation in Inflation Expectations. We find that higher Inflation Expectations on the part of firms leads them to raise their prices, increase their utilization of credit, and reduce their employment. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
Thomas I. Palley - One of the best experts on this subject based on the ideXlab platform.
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The economics of the Phillips curve: Formation of Inflation Expectations versus incorporation of Inflation Expectations
Structural Change and Economic Dynamics, 2012Co-Authors: Thomas I. PalleyAbstract:Abstract This paper examines the theory of the Phillips curve, focusing on the distinction between “formation” of Inflation Expectations and “incorporation” of Inflation Expectations. Phillips curve theory has largely focused on the former. Explaining the Phillips curve by reference to expectation formation keeps Phillips curve theory in the policy orbit of natural rate thinking where there is no welfare justification for higher Inflation even if there is a permanent Inflation–unemployment trade-off. Explaining the Phillips curve by reference to incorporation of Inflation Expectations breaks that orbit and provides a welfare economics rationale for Keynesian activist policies that reduce unemployment at the cost of higher Inflation.
Andrew J. Jalil - One of the best experts on this subject based on the ideXlab platform.
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Inflation Expectations in the U.S. in Fall 1933
Research in Economic History, 2017Co-Authors: Andrew J. Jalil, Gisela RuaAbstract:Abstract We document how Inflation Expectations evolved in the United States during the fall of 1933 using narrative evidence from historical news accounts and the forecasts of contemporary business analysts. We find that Inflation Expectations, after rising substantially during the spring of 1933, moderated in the fall in response to mixed messages from the Roosevelt Administration. The narrative accounts and our econometric model connect the dramatic swings in output growth in 1933 – the rapid recovery in the spring and the setback in the fall – to these sudden movements in Inflation Expectations.
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Inflation Expectations in the Recovery from the Great Depression
FEDS Notes, 2016Co-Authors: Andrew J. JalilAbstract:In this note, we draw on our recent research on the role of Inflation Expectations in the recovery from the Great Depression of the 1930s (Jalil and Rua, 2016a and 2016b) to provide insights into the actions that can successfully shift Inflation Expectations and stimulate economic recovery.
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Inflation Expectations and recovery in spring 1933
Explorations in Economic History, 2016Co-Authors: Andrew J. Jalil, Gisela RuaAbstract:This paper uses the historical narrative record to determine whether Inflation Expectations shifted during the second quarter of 1933, precisely as the recovery from the Great Depression took hold. First, by examining the historical news record and the forecasts of contemporary business analysts, we show that Inflation Expectations increased dramatically. Second, using an event-study approach, we identify the effect of the key events that shifted Inflation Expectations on financial markets. Third, we gather new evidence—both quantitative and narrative—that indicates that the shift in Inflation Expectations played a causal role in stimulating the recovery.
