TY - JOUR AU - Mankiw,N. Gregory AU - Reis,Ricardo AU - Wolfers,Justin TI - Disagreement about Inflation Expectations JF - National Bureau of Economic Research Working Paper Series VL - No. 9796 PY - 2003 Y2 - June 2003 UR - http://www.nber.org/papers/w9796 L1 - http://www.nber.org/papers/w9796.pdf N1 - Author contact info: N. Gregory Mankiw Department of Economics Littauer 223 Harvard University Cambridge, MA 02138 Tel: 617/495-4301 Fax: 617/495-7730 E-Mail: ngmankiw@fas.harvard.edu Ricardo Reis Department of Economics, MC 3308 Columbia University 420 West 118th Street, Rm. 1022 IAB New York NY 10027 Tel: 212-851-4007 Fax: 212-854-8059 E-Mail: rreis@columbia.edu Justin Wolfers Business and Public Policy Department Wharton School, University of Pennsylvania 3620 Locust Walk Room 1456 Steinberg-Deitrich Hall Philadelphia, PA 19104-6372 Tel: (215) 898-3013 Fax: (215) 898-7635 E-Mail: jwolfers@wharton.upenn.edu M1 - published as N. Gregory Mankiw, Ricardo Reis, Justin Wolfers. "Disagreement about Inflation Expectations," in Mark Gertler and Kenneth Rogoff, editors, "NBER Macroeconomics Annual 2003, Volume 18" The MIT Press (2004) AB - Analyzing 50 years of inflation expectations data from several sources, we document substantial disagreement among both consumers and professional economists about expected future inflation. Moreover, this disagreement shows substantial variation through time, moving with inflation, the absolute value of the change in inflation, and relative price variability. We argue that a satisfactory model of economic dynamics must speak to these important business cycle moments. Noting that most macroeconomic models do not endogenously generate disagreement, we show that a simple sticky-information' model broadly matches many of these facts. Moreover, the sticky-information model is consistent with other observed departures of inflation expectations from full rationality, including autocorrelated forecast errors and insufficient sensitivity to recent macroeconomic news. ER -