Stefano Fasani (Lecturer, Lancaster University Management School) will present his paper "Endogenous Uncertainty and the Macroeconomic Impact of Shocks to Inflation Expectations".
Inflation expectations are supposed to have a fundamental impact on economic processes and, hence, on economic policy in traditional models. However, little we know so far on the macroeconomic impact of a shock that increases short-term inflation expectations. Stefano Fasani with co-authors in their research provide a novel method to identify and measure a shock to inflation expectations taking into account endogenous uncertainty. The authors use the estimated structural model and demonstrate that increased inflation expectations have negative macroeconomic effect, increasing actual inflation and decreasing economic activity.
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