ARC Discovery Project

Measuring inflation expectations and inflation expectations uncertainty
Joshua Chan
Funded by The Australian Research Council, $283,000, 2017-2019

Summary of Proposal

Inflation expectations play a key role in determining future economic outcomes. This project aims to construct model-based measures of inflation expectations and inflation expectations uncertainty. This will be achieved by developing nonlinear time-varying models to combine information from noisy and possibly biased measures of inflation expectations obtained from surveys and financial markets. These new model-based measures are expected to be better calibrated and will provide valuable information for policymakers for formulating macroeconomic policies. They can be used to better assess the credibility of monetary policy and shed light on the causes of low inflation rate that is currently prevalent in many developed economies.

Impact Statement

The intended outcome of this project is to provide better measures of inflation expectations and inflation expectations uncertainty, and to enhance our understanding of the role of inflation expectations in driving macroeconomic outcomes. Thus, this project is expected to provide valuable information for policymakers, particularly central bankers, for reducing the risk in decision making and designing more effective macroeconomic policies.