Inflation expectations impact on inflation
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School of Business |
Bachelor's thesis
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Authors
Erkkilä, Markus
Date
2021
Department
Major/Subject
Mcode
Degree programme
Taloustiede
Language
en
Pages
28
Series
Abstract
This literature review examines how inflation expectations impact on inflation, and if they do, could central bank try to impact on peoples’ inflation expectations to indirectly control inflation. In the theory section, I will introduce why inflation expectations affect inflation in macroeconomic models. In the inflation forecasting section, I will present four popular inflation forecasting methods and show that surveys measuring inflation expectations are the best way to forecast inflation. After that, I’ll present more recent evidence on inflation expectations impact on inflation. Finally, I suggest that by better communication central bank can impact on peoples’ inflation expectations and control inflation.Description
Thesis advisor
Kitti, MitriKeywords
inflation, inflation expectations, rational expectations, inflation forecasting