This paper documents five facts about inflation expectations in the euro area. First, individual inflation forecasts … overreact to individual news. Second, the cross-section average of individual forecasts of inflation underreact to shocks … initially, but overreacts in the medium term. Third, disagreement about future inflation increases in response to news when the …

Cyprus, Greece, Ireland, Portugal, and Spain, ranging from roughly 0.5% (Ireland) to a whopping 43% (Greece) of 2010 output …

This paper identifies and quantifies the drivers of inflation dynamics in the three Baltic economies and assesses the … effectiveness of fiscal policy in fighting inflation. It also analyzes the macroeconomic impact of inflation on competitiveness by … focusing on the relationship between wages and productivity in the tradeable sector. The results reveal that inflation in the …

Central banks in major industrialized economies were slow to react to the surge in inflation that began in early 2021 … war in Ukraine. We investigate the consequences of policy delay in responding to inflation shocks. First, using a simple … three-period model, we show how policy delay worsens inflation outcomes, but can mitigate or even reverse the output decline …

This paper studies how and why inflation expectations have changed since the emergence of Covid-19. Using micro …-year and five-ten year horizons has widened since the surge of inflation during 2021, along with the mean. Persistently high … adaptive learning is able to mimic the change in inflation expectations over time for different demographic groups. The …

We examine whether changes in the distribution of household inflation expectations contain information on future … inflation. We first discuss recent shifts in micro data from the US, UK, Germany, and Canada. We then zoom in on the US to … explore econometrically whether distributional characteristics help predict future inflation. We find that the shape of the …

In this paper, we examine how economic shocks affect the distribution of household inflation expectations. We show that … the dynamics of households' expected inflation distributions are driven by three distinctive functional shocks, which … influence the expected inflation distribution through disagreement, level shift and ambiguity. Linking these functional shocks …

The surge in energy prices in 2022 has been a defining factor behind the increase in euro area inflation. We assess the … to mute the effects of the increase in energy prices and to lower inflation. Overall, we find that these unconventional … measures reduced euro area inflation by 1 to 2 percentage points in 2022 and may avoid an undershoot later on. When …

The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring … tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations, estimating a semi … data for the United States, we find that a positive inflation expectations shock is deflationary and contractionary …

advanced economies and emerging markets to quantify the effects of fiscal tightening on inflation expectations. We find that … fiscal consolidation announcements reduce inflation expectations over the medium-term (three and five-years ahead), but not …" about expected future inflation at longer horizons. The inflation anchoring role of consolidation announcements is enhanced …