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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research

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On the formation of inflation expectations in turbulent times: the case of the euro area, Economic Modelling June (2018). Łyziak, Tomasz; Paloviita, Maritta


Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
All authors as text Łyziak, Tomasz; Paloviita, Maritta 
Number of authors 2 
Status Published
Year of publication 2018 
Date 15.06.2018 
Name of article On the formation of inflation expectations in turbulent times: the case of the euro area 
Name of journal Economic Modelling
Volume of issue 72 
Number of issue June 
Pages 132-139 
Abstract Studying formation of inflation expectations in the euro area we propose a novel method, integrating rational, adaptive and sticky-information models. We find that in recent turbulent times, formation of inflation expectations by professional forecasters has displayed less inertia with the increased role of the perceived inflation target. Despite its slightly negative trend observed recently, the perceived target has remained broadly consistent with the ECB's announced inflation target. The direct impact of ECB inflation projections on expectations is minor, but growing marginally. However, inflation expectations remain consistent with the views and preferences of the ECB, which suggests effective management of expectations. Our results have implications for the conduct of ECB monetary policy, emphasising the need to monitor risks for price stability and expectations' de-anchoring in the context of complex models of their formation and for macroeconomic modelling, stressing the need to analyse monetary policy communication and changes in expectation formation over time.
Free text descriptor in Finnish inflaatio; odotukset; euroalue; 
Free text descriptor in English Formation of inflation expectations; Survey data; Euro area; Financial crisis; Low inflation 
JEL-codes D84; E52; E58 
ISSN / e-ISSN 0264-9993 
auki Internet addresses
Additional information Available online 1 February 2018
Notes BoF DP 13/2017 
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