A Behavioral Investigation of Inflation Expectations
| Inflation expectations are at the center of understanding modern macro-economic theory and monetary policy. It has become imperative that in order to manage the overall goal of price stability it is crucial for central banks to manage inflation expectations through their policy actions. Further, almost all macroeconomic monetary models are based on the assumption that agents maximize expected utility under well-defined distribution representing their inflation beliefs. Inflation expectations play a critical role in labor, product and financial markets. Representatives of labor and management need reliable forecasts of inflation in negotiating wage contracts. Individuals employ inflation forecasts in computing real interest rates for the purpose of making an array of financial decisions. Firms, for example, use real interest rates to make decisions on investment expenditures while households use this information to make purchases of consumer durables. Movement of capital internationally is largely driven by differences in real rates of return across countries. |
Project Team
Chetan Subramanian and Kanchan Mukherjee, Charan Singh
Sponsor
IIM Bangalore
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Project Status
Ongoing (Initiated in October 2014–April 2017)
Funded Projects Functional Area
Economics & Social Science
A Behavioral Investigation of Inflation Expectations
| Project Team: | Chetan Subramanian and Kanchan Mukherjee, Charan Singh | |
| Sponsor: | IIM Bangalore | |
| Project Status: | Ongoing (Initiated in October 2014–April 2017) | |
| Area: | Economics & Social Science | |
| Abstract: |
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