We are grateful for comments received during presentations at the University of Kansas, the Federal Reserve Bank of Kansas City, Carleton University, the AEA meetings, and the Canadian Economic Association meetings. Special thanks to Jean Boivin, Todd Clark, Andrea Raffo, Francisco Ruge-Murcia, and two anonymous referees for insights that have considerably improved the article. We are indebted to Matthew Cardillo for excellent research assistance. The views expressed in this paper are those of the authors. No responsibility for them should be attributed to the Bank of Canada.
Effective Use of Survey Information in Estimating the Evolution of Expected Inflation
Version of Record online: 27 JAN 2012
© 2012 The Ohio State University
Journal of Money, Credit and Banking
Volume 44, Issue 1, pages 145–169, February 2012
How to Cite
KOZICKI, S. and TINSLEY, P. A. (2012), Effective Use of Survey Information in Estimating the Evolution of Expected Inflation. Journal of Money, Credit and Banking, 44: 145–169. doi: 10.1111/j.1538-4616.2011.00471.x
- Issue online: 27 JAN 2012
- Version of Record online: 27 JAN 2012
- Received October 05, 2006; and accepted in revised form August 26, 2010.
- Livingston Survey;
- inflation persistence;
- shifting endpoint;
- unobserved components;
- Kalman filter
The evolution of the term structure of expected U.S. inflation is modeled using survey data to provide timely information on structural change not contained in lagged inflation data. To capture shifts in subjective perceptions, the model is adaptive to long-horizon survey expectations. However, even short-horizon survey expectations inform shifting-endpoint estimates that capture the lag between inflation and the perceived inflation target, which anchors inflation expectations. Results show movements of the perceived target are an important source of inflation persistence and suggest historical U.S. monetary policy was not fully credible for much of the postwar sample.