08347cas a2200817 a 4500 AALejournalIMF022780 230101c9999 xx r poo 0 0eng d 20.00 USD 9798400212734 1018-5941 BD-DhAAL BD-DhAAL Chang, Yoosoon. The Effects of Economic Shocks on Heterogeneous Inflation Expectations / Yoosoon Chang, Fabio Gomez-Rodriguez, Gee Hee Hong. Washington, D.C. : International Monetary Fund, 2022. 1 online resource (59 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 In this paper, we examine how economic shocks affect the distribution of household inflation expectations. We show that the dynamics of households' expected inflation distributions are driven by three distinctive functional shocks, which influence the expected inflation distribution through disagreement, level shift and ambiguity. Linking these functional shocks to economic shocks, we find that contractionary monetary shocks increase the average level of inflation expectation with anchoring effects, with a reduction in disagreement and an increase in the share of households expecting future inflation to be between 2 to 4 percent. Such anchoring effects are not observed when the high inflation periods prior to the Volcker disinflation are included. Expansionary government spending shocks have inflationary effects on both short and medium-run inflation expectations, while an increase in personal income tax shocks is inflationary for mediumrun. A surprise increase in gasoline prices increases the level of inflation expectations, but lowers the share of households with 2 percent inflation expectations. Mode of access: Internet Fiscal Policy imf Policy Coordination imf Policy Designs and Consistency imf Policy Objectives imf Studies of Particular Policy Episodes imf Gomez-Rodriguez, Fabio. Hong, Gee Hee.. 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