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Inflation expectations in the euro area: Are consumers rational?
Francisco Craveiro Dias
C16 - Specific Distributions
C22 - Time-Series Models
C43 - Index Numbers and Aggregation
E31 - Price Level; Inflation; Deflation
In this paper, we propose a quantitative measure for inflation expectations based on consumer survey data. Thereafter, we proceed to testing the rationality assumption. This issue is of noteworthy interest in its own as it is commonly assumed in the theoretical modelling literature that the rational expectations hypothesis holds. This analysis is conducted for the euro area as a whole, as well as for several member countries, using a sample covering the last two decades. Moreover, we also assess if the conclusions hold when one focuses on the post-euro introduction period.