Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5068445 | European Journal of Political Economy | 2007 | 16 Pages |
We investigate how the link between inflation and inflation expectations alters with increasing transparency. Our motivation stems from the belief that changes in the institutional features or operations of the central bank affect, first and foremost, the way that private agents form their expectations about the future behavior of the central bank and only through them, inflation. To examine the link between inflation and inflation expectations, we apply the framework used by Levin et al. [Levin, A.T., Natalucci, F.M., Piger, J.M., 2004. The macroeconomic effects of inflation targeting. Federal Reserve Bank of St. Louis Review 86, 51-80.] and make use of the recent development of quantitative measures for transparency. We find evidence that transparency helps fixing private sector inflation expectations.