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Estimation of historical inflation expectations
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Estimation of historical inflation expectations

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  • Binder, Carola Conces

Abstract

Expected inflation is a central variable in economic theory. Economic historians have estimated historical inflation expectations for a variety of purposes, including studies of the Fisher effect, the debt deflation hypothesis, central bank credibility, and expectations formation. I survey the statistical, narrative, and market-based approaches that have been used to estimate inflation expectations in historical eras, including the classical gold standard era, the hyperinflations of the 1920s, and the Great Depression, highlighting key methodological considerations and identifying areas that warrant further research. A meta-analysis of inflation expectations at the onset of the Great Depression reveals that the deflation of the early 1930s was mostly unanticipated, supporting the debt deflation hypothesis, and shows how these results are sensitive to estimation methodology.

Suggested Citation

  • Binder, Carola Conces, 2016. "Estimation of historical inflation expectations," Explorations in Economic History, Elsevier, vol. 61(C), pages 1-31.
    • Handle: RePEc:eee:exehis:v:61:y:2016:i:c:p:1-31
    DOI: 10.1016/j.eeh.2016.01.002
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    1. Martin Ellison & Sang Seok Lee & Kevin Hjortshøj O'Rourke, 2024. "The Ends of 27 Big Depressions," American Economic Review, American Economic Association, vol. 114(1), pages 134-168, January.
    2. Martin Ellison & Sang Seok Lee & Kevin Hjortshøj O’Rourke, 2020. "The Ends of 30 Big Depressions," Economics Series Working Papers 896, University of Oxford, Department of Economics.
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    More about this item

    Keywords

    Inflation expectations; Fisher effect; gold standard; Hyperinflation; Great Depression; Rational expectations; Debt deflation;
    All these keywords.

    JEL classification:

    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

    Statistics

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