Deflation tends to de-anchor expectations – BIS paper
Deflationary episodes seem to render expectations lower and more backward-looking
Bouts of deflation tend to cause inflation expectations to become less well anchored, according to research published by the Bank for International Settlements.
The working paper, Deflation expectations, by Ryan Niladri Banerjee and Aaron Mehrotra studies inflation expectations among professional forecasters in 43 emerging and advanced economies. “The global nature of the data set is highly relevant, as deflations have not been limited to advanced economies – 30 of the 47 deflationary episodes
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