Events

Prof. Leland Farmer
Assistant Professor of Economics
Department of Economics at the University of Virginia (UVA)

We develop a model of the individual term structure of inflation expectations across forecasting
horizons. Using the Survey of Professional Forecasters, we decompose disagreement
about inflation expectations into individuals’ long-term beliefs, private information, and
public information. We find that in normal times, long-horizon disagreement is predominantly
driven by individuals’ long-term beliefs, while short-horizon disagreement stems
from private information. During economic downturns, heterogeneous reactions to public
information become a key driver of disagreement at all horizons. When forecasters disagree
about public information, monetary policy exhibits a delayed response and a price puzzle
emerges, underscoring the importance of anchoring inflation expectations.