Abstract
We investigate inflation expectations and their measures amid the 2022 surge in the Czech Republic. Using data and econometric analyses, we explore how inflation expectations are formed and how they may affect inflation developments. To capture the overall trend of inflation expectations in the Czech economy, we develop a Common Inflation Expectations index. Additionally, we extend the CNB’s g3+ core projection model by incorporating endogenous expectation premiums that reflect elevated inflation expectations. Utilizing the Common Inflation Expectations index and the modified model, we construct a simulation that provides policy-relevant outcomes when addressing high inflation.
Authors
- František Brázdik
- Tatiana Keseliová
- Karel Musil
- Radek Šnobl
- Jan Šolc
- Stanislav Tvrz
- Jan Žáček
JEL codes
- C32
- C50
- E31
- E50
- E37