Research & Conferences

ARE WE REALLY FORWARD-LOOKING?
MEASURING AND TESTING EXPECTATIONS
– CENTRAL BANK PERSPECTIVE

National Bank of Poland,
29-30 November, 2012
Warsaw, Poland

Expectations are crucial in modern macroeconomics. They are of interest especially to central banks, mainly due to the fact that they can play an important role in the transmission of monetary policy and in the price and wage formation. From this point of view, the degree of forward-lookingness vs. backward-lookingness constitutes a particularly important feature of expectations formation. However, it is often subject to ad hoc assumptions in macroeconomic debates and macroeconomic models alike.

The importance of expectations in modern monetary policy, and wide interest aroused by the 2006 NBP workshop “The role of inflation expectations in modelling and monetary policy making” (9-10 February 2006) – whose contributions were recently published (P. Sinclair, ed., 2010, Inflation Expectations, Routledge) – has inspired the National Bank of Poland to organize another event on a similar topic.

The workshop aims to gather the most recent research concerning advances in the measurement of expectations, empirical testing of expectation formation process, especially the degree of their forward-lookingness, as well as the relevance of direct measures of expectations and empirical assessment of their formation for conducting monetary policy. Although inflation expectations are particularly interesting for central banks, during the workshop we would also like to analyze expectations related to other variables, such as household financial position, unemployment etc.

In particular we would like to address the following research areas:

  1. Measurement of expectations and the use of survey data:
    In the long history of expectations measurement, surveys remain the most important source of data. However, we are still learning how to use this instrument to get the most accurate and rich information on people’s beliefs. How do respondents interpret the questions asked? How does the wording of the question affect responses? How should we quantify qualitative data without imposing excessively strong assumptions? How to measure uncertainty of opinions expressed? How to use other sources (e.g. financial market data) to derive measures of inflation expectations?
  2. Formation process of economic expectations:
    Empirical studies clearly indicate that economic expectations of agents are neither purely rational nor purely adaptive. During the last decade, increasingly more attention has been attracted to the ideas of sticky information, rational inattention, adaptive learning, or heterogeneity of expectations. Behavioural economics attempts to explain deviations from rational expectations with insights from psychology and experimental evidence. There are studies indicating that non-economic factors, such as personal characteristics or media news, might influence economic agents’ opinions about the future. So, what is the best way to describe expectation formation? What consequences does it involve for the conduct of monetary policy? How should we combine findings from experimental studies and studies based on survey data in assessing formation of expectations?
  3. The impact of the financial crisis on inflation expectations:
    The recent financial crisis increased uncertainty of the economic environment and potentially affected inflation expectations properties. What happened to inflation expectations during the crisis? Do we have to distinguish between uncertainty and risk? Are these changes permanent? What are the consequences for monetary policy?

Scientific Committee:

  1. Professor Roy Batchelor, Cass Business School, London
  2. Professor Ryszard Kokoszczyński, University of Warsaw and the National Bank of Poland
  3. Dr Christian Muller, Zurich University of Applied Sciences
  4. Professor Peter Sinclair, University of Birmingham and the Bank of England
  5. Dr Emilia Tomczyk, Warsaw School of Economics

Paper submission:

Researchers are invited to submit papers on the above and related topics to be discussed during the workshop. Only complete papers will be considered. They should be sent by e-mail to: expectations2012@nbp.pl. The deadline for submissions is 15 August, 2012.

Important dates:

  • 15 August 2012 – paper submission deadline
  • 30 September 2012 – author notification
  • 30 September 2012 - 31 October 2012 – registration
  • 29-30 November 2012 – conference

Should you have any questions, please contact: expectations2012@nbp.pl

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