01905cas a2200277 a 4500 AALejournalIMF018943 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484388846 1018-5941 BD-DhAAL BD-DhAAL Bems, Rudolfs. Expectations' Anchoring and Inflation Persistence / Rudolfs Bems, Francesca Caselli, Francesco Grigoli, Bertrand Gruss. Washington, D.C. : International Monetary Fund, 2018. 1 online resource (31 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989. We then study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates. We find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored. Mode of access: Internet Caselli, Francesca. Grigoli, Francesco. Gruss, Bertrand. IMF Working Papers; Working Paper ; No. 2018/280 Full text available on IMF http://elibrary.imf.org/view/journals/001/2018/280/001.2018.issue-280-en.xml IMF e-Library