Working Paper
Long memory in inflation expectations: evidence from international expectations
Abstract: This study provides evidence that 10-year-ahead inflation expectations adapt very slowly to changes in realized inflation. This evidence derives primarily from yields on 10-year government bonds in a sample of OECD countries, including inflation-indexed bonds where they are available. The study examines both the cross-country and time-series behavior of interest rates and inflation rates. For the United States, additional evidence is provided from a survey of 10-year inflation expectations held by market participants. This study does not present a theoretical model of expectations formation. However, long memory of the type documented in this study would be implied by a model of multiple inflationary regimes in which agents base their probability distributions of future regimes on past inflationary experience.
Keywords: Inflation (Finance);
Access Documents
File(s): File format is text/html http://www.federalreserve.gov/pubs/ifdp/1996/538/default.htm
File(s): File format is application/pdf http://www.federalreserve.gov/pubs/ifdp/1996/538/ifdp538.pdf
Authors
Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: International Finance Discussion Papers
Publication Date: 1996
Number: 538