Expected and Realized Inflation in Historical Perspective

Bibliographic Data

ID4029684
AuthorsCarola Binder (Carola Binder is Associate Professor of Economics, Haverford College, Haverford, Pennsylvania.), Carola Conces Binder (0000-0001-5694-2070, Haverford College), Rupal Kamdar (Rupal Kamdar is Assistant Professor of Economics, Indiana University, Bloomington, Indiana. .)
Year2022
Volume36
Issue3
Pages131-155
Publication date2022-08-01
Open AccessYes
TypeARTICLE
VenueThe Journal of Economic Perspectives (JOURNAL)
Journal identifiersISSN: 0895-3309 • E-ISSN: 1944-7965
PublisherAmerican Economic Association (PUBLISHER • US)
DOI10.1257/jep.36.3.131
OpenAlexW4293327513
LanguageEN
Citations received1
References cited16

This paper provides historical context for the relationship between expected and realized inflation. We begin with a discussion of early theoretical thought about how inflation expectations are formed. Then, we discuss survey- and asset- based measures of inflation expectations and assess their empirical relationship with realized inflation. Expected and realized inflation are strongly correlated over long samples, but over short samples the correlations can weaken. Lastly, to better understand the subtleties of the interaction between expected and realized inflation over short-lived but important events, we provide a narrative account of the relationship during the Great Depression of the 1930s, the Great Inflation of the 1970s, the Great Recession of 2008-2009, and the recent COVID-19 pandemic. These episodes offer compelling evidence of the importance of expectations and policy regime changes in inflation dynamics

Economics · Geography · Great Depression · Great recession · Keynesian economics · Macroeconomics · Monetary economics · Monetary policy · Political science · Recession · Financial Markets and Investment Strategies · Market Dynamics and Volatility · Monetary Policy and Economic Impact

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Open DOIOpen Access