This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced...

Using micro data from the 2015 Dutch CentERpanel, we examine whether trust in the European Central Bank (ECB) influences individuals' expectations and uncertainty about future inflation, and whether it anchors inflation expectations. We find that higher trust in the ECB lowers inflation...

When countries are hit by supply shocks, central banks often face the dilemma of either looking through such shocks or reacting to them to ensure that inflation expectations remain anchored. In this paper, we propose a tractable framework to capture this dilemma and explore optimal policy under...

Using randomized control trials (RCTs) applied over time in different countries, we study how the economic environment affects how agents learn from new information. We show that as inflation has recently risen in advanced economies, both households and firms have become more attentive and...

We develop a dynamic general equilibrium model to analyze the effects of central bank purchases of government bonds by investigating the following three questions: Under what conditions are these purchases socially desirable, what incentive problems do they mitigate, and how large are these...

We develop a microfounded model, where agents have the possibility to trade money for government bonds in an over-the-counter market. It allows us to address important open questions about the effects of central bank purchases of government bonds, these being: under what conditions these...

This paper combines new data and a narrative approach to identify shocks to political pressure on the Federal Reserve. From archival records, I build a data set of personal interactions between U.S. Presidents and Fed officials between 1933 and 2016. Since personal interactions do not...

The theoretical foundation of inflation targeting was laid out by the Swedish economist Knut Wicksell (1851-1926) in his groundbreaking treatise, Interest and Prices, published originally in German in 1898. Here he proposed price stability as the rule for monetary policy. Today, inflation...

We empirically characterize episodes of large inflation surges that have been observed worldwide in the last three decades. We document four facts. (1) Inflation surges tend to be persistent, with the duration of disinflation exceeding that of the initial inflation increase. (2) Surges are...

We answer the question posed by the title by specifying and estimating a simple dynamic model of prices, wages, and short-run and long-run inflation expectations. The estimated model allows us to analyze the direct and indirect effects of product-market and labor-market shocks on prices and...