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Inflation Expectations

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The New Palgrave Dictionary of Economics

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Abstract

Agents’ expectations about future values of inflation play an important role in macroeconomic analysis. From a steady-state perspective, higher expected inflation rates induce agents to hold smaller real money balances and, in most models, to hold different amounts of capital. In dynamic analysis, inflationary expectations affect agents’ decisions regarding saving and price adjustments, and affect monetary policy behaviour in ways that have become increasingly important. Over time, analysts’ treatment of expectations evolved from distributed-lag, adaptive models to rational expectations, a change that had major analytical implications. Analysis of learning behaviour has become more prominent, supplementing or occasionally replacing rational expectations.

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  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    Bennett T. McCallum

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  1. Bennett T. McCallum
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McCallum, B.T. (2018). Inflation Expectations. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_793

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