The Formation of Expectations, Inflation, and the Phillips Curve

• Autores: Olivier Coibion, Yuriy Gorodnichenko, Rupal Kamdar
• Localización: Journal of economic literature, ISSN 0022-0515, Vol. 56, Nº 4, 2018, págs. 1447-1491
• Idioma: inglés
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• Resumen

  • This paper argues for a careful (re)consideration of the expectations formation process and a more systematic inclusion of real-time expectations through survey data in macroeconomic analyses. While the rational expectations revolution has allowed for great leaps in macroeconomic modeling, the surveyed empirical micro-evidence appears increasingly at odds with the full-information rational expectation assumption. We explore models of expectation formation that can potentially explain why and how survey data deviate from full-information rational expectations. Using the New Keynesian Phillips curve as an extensive case study, we demonstrate how incorporating survey data on inflation expectations can address a number of otherwise puzzling shortcomings that arise under the assumption of full-information rational expectations.