Search Results

You are looking at 1 - 4 of 4 items for :

  • "inflation expectation formation mechanism" x
Clear All
Bertrand Gruss, Mrs. Sandra V Lizarazo Ruiz, and Mr. Francesco Grigoli

based on sticky information and goes over alternative characterizations of the inflation expectation formation mechanisms. Section 5 concludes. 2 Data Our data consists of daily inflation and federal funds rate forecasts for the United States at the analyst level between November 18, 2002 and December 18, 2018 obtained from Bloomberg. The dataset includes forecasts of 496 analysts from major financial institutions worldwide on inflation and the federal funds rate, submitted at irregular intervals (so the panel is unbalanced). 3 The timeline of the

Bertrand Gruss, Mrs. Sandra V Lizarazo Ruiz, and Mr. Francesco Grigoli
Anchoring of inflation expectations is of paramount importance for central banks’ ability to deliver stable inflation and minimize price dispersion. Relying on daily interest rates and inflation forecasts from major financial institutions in the United States, we calculate monetary policy surprises of individual analysts as the unexpected changes in the federal funds rate before the meetings of the Federal Reserve Board. We then assess the effect of monetary policy surprises on the dispersion of inflation expectations, a proxy for the extent of anchoring, which is based on the same analysts’ inflation projections submit-ted after the Fed meetings. With an identification strategy that hinges on a tight window around the Fed meetings, we find that monetary policy surprises lead to an increase in the dispersion of inflation expectations up to nine months after the policy meeting. We rationalize these results with a partial equilibrium model that features rational expectations and sticky information. When we allow the degree of information rigidity to depend on the realization of firm-specific shocks, the theoretical results are qualitatively consistent and quantitatively close to the empirical evidence.
Elías Albagli, Mr. Francesco Grigoli, and Emiliano Luttini

information frictions in the inflation expectation formation mechanism. The closest paper to ours is Andrade et al. (2022) , which shows that French firms learn from inflation observed in their industry. Compared to this paper, we shift the focus from industry inflation to supply chain inflation, which better aligns with Lucas (1972) ’s framework for which firms observe prices at which they settle transactions with their suppliers rather than industry inflation. It also squares with the fact that firms may operate at the intersection of different industries, a reason for