Losing the inflation anchor

Reis, Ricardo ORCID: 0000-0003-4844-9483 (2022) Losing the inflation anchor. Brookings Papers on Economic Activity. ISSN 0007-2303

Text (endanchor-v3) - Published Version Download (355kB)

• Author

Abstract

Inflation has an anchor in people’s expectations of what its long-run value will be. If expectations persistently change, then the anchor is adrift; if they differ from the central bank’s target, the anchor is lost. This paper uses data on expectations from market prices, from professional surveys, and from the cross-sectional distribution of household surveys to measure shifts in this anchor. Its main application is to the US Great Inflation. The data suggests that the anchor started drifting as early as 1967 and that this could have been spotted well before policymakers did. Using this approach on expectations data from Brazil, Turkey, South Africa, the US in the 1970s, and the US in 2021, confirms their usefulness to measure the inflation anchor in real time.

Item Type:	Article
Official URL:	https://www.brookings.edu/project/brookings-papers...
Additional Information:	© 2021 Brookings Institute
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions
Date Deposited:	19 Oct 2021 09:00
Last Modified:	12 Dec 2024 02:42
URI:	http://eprints.lse.ac.uk/id/eprint/112462

Actions (login required)

View Item