01941cas a2200313 a 4500 AALejournalIMF022668 230101c9999 xx r poo 0 0eng d 20.00 USD 9798400206313 1018-5941 BD-DhAAL BD-DhAAL Barrett, Philip. Shocks to Inflation Expectations / Philip Barrett, Jonathan Adams. Washington, D.C. : International Monetary Fund, 2022. 1 online resource (52 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 The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations, estimating a semi-structural VAR where an expectation shock is identified as that which causes measured expectations to diverge from rationality. Using data for the United States, we find that a positive inflation expectations shock is deflationary and contractionary: inflation, output, and interest rates all fall. These results are inconsistent with the standard New Keynesian model, which predicts inflation and interest rate hikes. We discuss possible resolutions to this new puzzle. Mode of access: Internet Deflation imf Expectations imf Inflation imf Price Level imf Speculations imf Adams, Jonathan. IMF Working Papers; Working Paper ; No. 2022/072 Full text available on IMF https://elibrary.imf.org/openurl?genre=journal&issn=1018-5941&volume=2022&issue=072 IMF e-Library