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Inflation expectations in the Euro area: are consumers rational?

[journal article]

Dias, Francisco; Duarte, Cláudia; Rua, António

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Abstract In this paper, we propose a quantitative measure for inflation expectations based on consumer survey data. Thereafter, we proceed to testing the rationality assumption. This issue is of noteworthy interest in its own as it is commonly assumed in the theoretical modelling literature that the rational expectations hypothesis holds. This analysis is conducted for the euro area as a whole, as well as for several member countries, using a sample covering the last two decades. Moreover, we also assess if the conclusions hold when one focuses on the post-euro introduction period.
Classification Political Economy; Economic Statistics, Econometrics, Business Informatics
Free Keywords Inflation expectations; Consumer survey; Probability method; Rationality tests; Common factors; C16; C22; C43; E31
Document language English
Publication Year 2010
Page/Pages p. 591-607
Journal Review of World Economics, 146 (2010) 3
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)