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Working Paper
Understanding Persistent Stagnation
Cuba-Borda, Pablo A.; Singh, Sanjay R. (2019-03-07)
We theoretically explore long-run stagnation at the zero lower bound in a representative agent framework. We analytically compare expectations-driven stagnation to a secular stagnation episode and find contrasting policy implications for changes in government spending, supply shocks and neo-Fisherian policies. On the other hand, a minimum wage policy is expansionary and robust to the source of stagnation. Using Bayesian methods, we estimate a DSGE model that can accommodate two competing hypotheses of long-run stagnation in Japan. We document that equilibrium selection under indeterminacy ...
International Finance Discussion Papers , Paper 1243

Speech
Monetary policy strategies for a low-neutral-interest-rate world: remarks at the 80th Plenary Meeting of the Group of Thirty, Federal Reserve Bank of New York, New York City
Williams, John C. (2018-11-30)
Remarks at the 80th Plenary Meeting of the Group of Thirty, Federal Reserve Bank of New York, New York City.
Speech , Paper 303

Working Paper
Inflation and Deflationary Biases in Inflation Expectations
Lamla, Michael J.; Pfajfar, Damjan; Rendell, Lea (2019-06-03)
We explore the consequences of losing confidence in the price-stability objective of central banks by quantifying the inflation and deflationary biases in inflation expectations. In a model with an occasionally binding zero-lower-bound constraint, we show that an inflation bias as well as a deflationary bias exist as a steady-state outcome. We assess the predictions of this model using unique individual-level inflation expectations data across nine countries that allow for a direct identification of these biases. Both inflation and deflationary biases are present (and sizable) in inflation ...
Finance and Economics Discussion Series , Paper 2019-042

Journal Article
On the Mechanics of Fiscal Inflations
Bassetto, Marco; Benzoni, Luca; Hall, Jason (2024-07-12)
The goal of this paper is twofold. First, we wish to better explain the relationship between Sargent and Wallace’s (1981) unpleasant monetarist arithmetic, the closely connected fiscal theory of the price level (FTPL), and the monetarist view of inflation. Second, we discuss how the recent inflationary episode has contributed to redistributing real resources from holders of government debt to the public purse. In particular, financial prices before the onset of the COVID pandemic suggest that investors viewed an inflationary shock such as the one we experienced as extremely unlikely, so the ...
Quarterly Review , Volume 44 , Issue 2

Report
Fitting observed inflation expectations
Del Negro, Marco; Eusepi, Stefano (2010-11-01)
This paper provides evidence on the extent to which inflation expectations generated by a standard Christiano et al. (2005)/Smets and Wouters (2003)?type DSGE model are in line with what is observed in the data. We consider three variants of this model that differ in terms of the behavior of, and the public?s information on, the central banks? inflation target, allegedly a key determinant of inflation expectations. We find that: 1) time-variation in the inflation target is needed to capture the evolution of expectations during the post-Volcker period; 2) the variant where agents have ...
Staff Reports , Paper 476

Working Paper
Inflation Levels and (In)Attention
Bracha, Anat; Tang, Jenny (2022-01-01)
Inflation expectations are key determinants of economic activity and are central to the current policy debate about whether inflation expectations will remain anchored in the face of recent pandemic-related increases in inflation. This paper explores evidence of inattention by constructing two different measures of consumers’ inattention and documents greater inattention when inflation is low. This suggests that there is indeed a risk of an acceleration in the increases in inflation expectations if actual inflation remains high.
Working Papers , Paper 22-4

Working Paper
Practice Makes Perfect: Learning Effects with Household Point and Density Forecasts of Inflation
Mitchell, James; Shiroff, Taylor; Braitsch, Hana (2024-11-13)
This paper shows how both the characteristics and the accuracy of the point and density forecasts from a well-known panel data survey of households' inflationary expectations – the New York Fed's Survey of Consumer Expectations – depend on the tenure of survey respondents. Households' point and density forecasts of inflation become significantly more accurate with repeated practice of completing the survey. These learning gains are best identified when tenure-based combination forecasts are constructed. Tenured households on average produce lower point forecasts of inflation, perceive ...
Working Papers , Paper 24-25

Beyond the Mean: Exploring Tail Risks in Inflation Expectations
Kozlowski, Julian (2024-07-02)
An analysis of inflation expectations suggests that financial market participants see a 50% probability that CPI inflation could be higher than 2.5% over the next five years.
On the Economy

Working Paper
Average Inflation Targeting and Household Expectations
Coibion, Olivier; Knotek, Edward S.; Gorodnichenko, Yuriy (2021-12-20)
Using a daily survey of U.S. households, we study how the Federal Reserve’s announcement of its new strategy of average inflation targeting affected households’ expectations. Starting with the day of the announcement, there is a very small uptick in the minority of households reporting that they had heard news about monetary policy relative to prior to the announcement, but this effect fades within a few days. Those hearing news about the announcement do not seem to have understood the announcement: they are no more likely to correctly identify the Fed’s new strategy than others, nor ...
Working Papers , Paper 20-26R

Working Paper
Household Beliefs about Fiscal Dominance
Andrade, Philippe; Gautier, Erwan; Mengus, Eric; Moench, Emanuel (2025-03-01)
We study beliefs about fiscal dominance using a survey of German households. We first design and conduct a randomized controlled trial to identify how fiscal news impacts individuals’ debt-to-GDP and inflation expectations. We document that the link between debt and inflation crucially depends on individuals’ views about the fiscal space. News leading individuals to expect a higher debt-to-GDP ratio makes them more likely to revise their inflation expectations upward. These average effects are driven by individuals who think that fiscal resources are stretched. By contrast, individuals ...
Working Papers , Paper 25-2

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