DP13601 Inflation Expectations: Review and Evidence

Author(s): Ayhan Kose, Hideaki Matsuoka, Ugo Panizza, Dana Vorisek
Publication Date: March 2019
Keyword(s): developing economies, emerging markets, inflation, Inflation expectations, monetary policy
JEL(s): E31, E37, E40, E50
Programme Areas: International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13601

This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced economies, despite notable improvements over the past two decades. Indeed, in EMDEs, long-term inflation expectations are more sensitive to both domestic and global inflation shocks. However, EMDEs tend to be more successful in anchoring inflation expectations in the presence of an inflation targeting regime, high central bank transparency, strong trade integration, and a low level of public debt.