Monetary policy uncertainty and inflation expectations

Arbeitspapier

Do inflation expectations react to changes in the volatility of monetary policy? Yes, but only until the global financial crisis. This paper investigates whether increasing the dispersion of monetary policy shocks, which is interpreted as elevated uncertainty surrounding monetary policy, affects the inflation expectation formation process. Based on U.S. data since the 1980s and a stochastic volatility-in-mean structural VAR model we find that monetary policy uncertainty reduces both inflation expectations and inflation. However, after the Great Recession this link has disappeared, even when controlling for the Zero Lower Bound.

Object Details

• ISBN: 978-3-96973-039-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 899

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Monetary Policy
• Subject: Monetary policy uncertainty ; inflation expectations ; SVAR volatility-in-mean ; time-varying coefficients

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Arce-Alfaro, Gabriel ; Blagov, Boris
• Event: Veröffentlichung
• (who): RWI - Leibniz-Institut für Wirtschaftsforschung
• (where): Essen
• (when): 2021

Further information

• DOI: doi:10.4419/96973039
• Handle: http://hdl.handle.net/10419/232074
• Last update: 10.03.2025, 11:45 AM CET