Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315938 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. WP 2025-03
Publisher: 
Federal Reserve Bank of Chicago, Chicago, IL
Abstract: 
Professional forecasters' long-run inflation expectations overreact to news and exhibit persistent, predictable biases in forecast errors. A model incorporating overconfidence in private information and a persistent expectations bias-which generates persistent forecast errors across most forecasters-accounts for these two features of the data, offering a valuable tool for studying long-run inflation expectations. Our analysis highlights substantial, timevarying heterogeneity in forecasters' responses to public information, with sensitivity declining across all forecasters when monetary policy is constrained by the effective lower bound. The model provides a framework to evaluate whether policymakers' communicated inflation paths are consistent with anchored long-run expectations.
Subjects: 
Panel survey data
long-run inflation expectations
rationality
expectation bias
overconfidence
overreaction
central bank communications
anchoring
JEL: 
E31
D83
E52
E37
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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