Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203644
Authors: 
Lamla, Michael
Pfajfar, Damjan
Rendell, Lea
Year of Publication: 
2019
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2019: 30 Jahre Mauerfall - Demokratie und Marktwirtschaft - Session: Monetary Policy III No. B22-V3
Abstract: 
We explore the consequences of losing confidence in the price-stability objective of central banks by quantifying the inflation and deflationary biases in inflation expectations. In a model with an occasionally binding zero-lower-bound constraint, we show that an inflation bias as well as a deflationary bias exist as a steady-state outcome. We assess the predictions of this model using unique individual-level inflation expectations data across nine countries that allow for a direct identification of these biases. Both inflation and deflationary biases are present (and sizable) in inflation expectations of these individuals. Among the euro-area countries in our sample, we can document significant differences in perceptions of the European Central Bank's objectives, despite having a common monetary policy.
Subjects: 
inflation bias
deflationary bias
confidence in central banks
trust
ZLB
inflation
expectations
microdata
JEL: 
E31
E37
E58
D84
Document Type: 
Conference Paper

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