European Union consumer inflation expectations in macro panels
DOI:
https://doi.org/10.2478/rsep-2025-0006Keywords:
Consumer Inflation Expectations, Balance Statistics, Carlson-Parkin Method, Survey DataAbstract
Paper investigates the role of consumer inflation expectations in macroeconomic variable dynamics within select European Union countries from 2004Q1 to 2024Q3, employing a panel vector autoregression (PVAR) model. The empirical analysis compares two approaches: balance statistics and various configurations of the Carlson-Parkin quantification method, studying variations in inferred dynamics dependent upon methodological selection. The results indicate that consumer inflation expectations modestly influence aggregate demand and inflation, consistent with intertemporal substitution effects. However, the anticipated wage-price spiral was largely absent, and the relationship between unemployment and inflation was weaker than traditional Phillips curve frameworks would predict, suggesting structural factors or unemployment rates above the natural unemployment rate. Furthermore, macroeconomic relationships found, particularly concerning consumer sentiment are dependent on methodological choices. Lastly, heterogeneity in dynamics between different countries is analysed. This heterogeneity underscores the value of country-specific analysis for understanding the transmission of inflation expectations to macroeconomic outcomes.References
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