This paper examines two candidate hypotheses explaining the stabilization of U.S. inflation since the 1970s and 1980s …. The first explanation credits the stabilization of inflation expectations, and assumes those expectations have a strong … positive causal effect on actual subsequent inflation, while the second explanation credits the disappearance of such a strong …

Economists and economic policymakers believe that households' and firms' expectations of future inflation are a key … determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on …

Inflation measurement is the process through which changes in the prices of individual goods and services are combined … to yield a measure of general price change. This paper discusses the conceptual framework for thinking about inflation … measurement and considers practical issues associated with determining an inflation measure's scope; with measuring individual …

This paper studies the welfare consequences of exogenous variations in trend inflation in a New Keynesian economy …. Consumption and leisure respond asymmetrically to a rise and a decline in trend inflation. As a result, an increase in the … variance of shocks to the trend inflation process decreases welfare not only by increasing the volatilities of consumption and …

We use several US and euro-area surveys of professional forecasters to estimate a dynamic factor model of inflation … featuring time-varying uncertainty. We obtain survey-consistent distributions of future inflation at any horizon, both in the US … and the euro area. Equipped with this model, we propose a novel measure of the anchoring of inflation expectations that …

the inflation target. Active QE is primarily required when nominal interest rates are near the ELB, pointing to benefits …

inflation expectations and monetary policy design. The central question in this paper is how to design monetary policy when … expectations formation is not perfectly rational. Instrumental rules that use actual rather than forecasted inflation produce lower … inflation variability and reduce expectational cycles. A forward-looking Taylor rule where a reaction coefficient equals 4 …