Arbeitspapier
Does inflation targeting reduce the dispersion of price setters' inflation expectations?
Using detailed Swedish micro data on prices and costs, this paper documents a decrease in the dispersion of changes in prices and markups following the introduction of an official inflation target of 2 percent. Using a structural model to decompose the change in the price-change distribution by potential explanatory factors, about 63 percent of the decrease in the price-change dispersion can be attributed to a decrease in the cross-sectional variance of inflation expectations. The lower dispersion of inflation expectations results in a lower markup dispersion and a welfare gain equivalent to a 0.79 percent increase in consumption.
- Language
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Englisch
- Bibliographic citation
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Series: Sveriges Riksbank Working Paper Series ; No. 370
- Classification
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Wirtschaft
Expectations; Speculations
Monetary Policy
Production, Pricing, and Market Structure; Size Distribution of Firms
- Subject
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Inflation targeting
price setting
misallocation
welfare
- Event
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Geistige Schöpfung
- (who)
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Paulie, Charlotte
- Event
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Veröffentlichung
- (who)
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Sveriges Riksbank
- (where)
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Stockholm
- (when)
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2019
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Paulie, Charlotte
- Sveriges Riksbank
Time of origin
- 2019