A new approach to assess inflation expectations anchoring using strategic surveys.

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Publisher: Elsevier B.V.
Document Type: Report; Brief article
Length: 365 words

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Keywords Inflation; Expectations; Anchoring; Surveys; Experiments Highlights * We propose a new approach to assess the anchoring of inflation expectations using "strategic surveys." Namely, we measure households' revisions in long-run inflation expectations after they are presented with different economic scenarios. * A key advantage of this approach is that it provides a causal interpretation in terms of how inflation events affect long-run inflation expectations. * We implement the method in the summer of 2019 and the spring-summer of 2021 when the anchoring of long-run inflation expectations was in question. * We find that the risk of un-anchoring of expectations was reasonably low in both periods, and that long-run inflation expectations were essentially as well anchored in August 2021 as in July 2019, before the Covid-19 pandemic. Abstract We propose a new approach to assess inflation expectations anchoring using "strategic surveys." Namely, we measure households' revisions in long-run inflation expectations after they are presented with different economic scenarios. This approach has a causal interpretation and maps directly into policy makers concerns. We implement the method in the summer of 2019 and the spring-summer of 2021 when the anchoring of long-run inflation expectations was questioned. We find that the risk of un-anchoring was reasonably low in both periods, and that long-run inflation expectations were essentially as well anchored in August 2021 as in July 2019, before the Covid-19 pandemic. Author Affiliation: Federal Reserve Bank of New York, 33 Liberty Street, NY 10045, USA * Corresponding author. Article History: Received 1 December 2021; Revised 10 May 2022; Accepted 11 May 2022 (footnote)# Federal Reserve Bank of New York. The authors thank Leo Goldman, Rachel Pomerantz and Kyle Smith for their excellent research assistance. We also thank seminar and conference participants at the Bank of Canada, the Second Joint ECB-NY Fed Conference on Expectations Surveys, the Society for Experimental Finance conference, and the Southern Economic Association conference. The views expressed in this paper are ours alone and do not necessarily reflect the official views of the Federal Reserve Bank of New York, the Federal Open Market Committee, or the Federal Reserve System. Byline: Olivier Armantier [Olivier.armantier@ny.frb.org] (*), Argia Sbordone, Giorgio Topa, Wilbert van der Klaauw, John C. Williams (#)

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Gale Document Number: GALE|A708650509