07.04.2007.

Inflation Expectations in Latvia: Consumer Survey Based Results

• Daina Paula

Economist, Latvijas Banka
• Konstantīns Beņkovskis

Economist, Latvijas Banka

Working Paper 1/2007

Abstract
The objective of this study is the quantification of inflation expectations in Latvia using the results of consumer surveys and the assessment of the impact inflation expectations have on actual inflation. In order to attain the objectives set, the authors of the study quantified inflation expectations applying the widely accepted probability approach and produced a small-scale VAR model capturing actual inflation and the quantified inflation expectations. Both the surveyed balance sheet data and quantified values of inflation expectations confirm that inflation expectations strengthened substantially prior to Latvia's accession to the EU. The findings of the VAR model with inflation expectations indicate that inflation expectations have a statistically significant impact on inflation in Latvia. The response of inflation expectations to inflation and domestic demand shocks is positive, although a deviation implies that the response to a domestic demand shock is not statistically significant.

Keywords: inflation expectations, survey data, VAR model

JEL codes: C32, C83, D84, E31

Extended research published: The Role of Inflation Expectations in the New EU Member States: Consumer Survey Based Results. Czech Journal of Economics and Finance, 2008, No. 58 (7-8), pp. 298-317. Available:
http://journal.fsv.cuni.cz/mag/article/show/id/1133

APA: Paula, D., Beņkovskis, K. (2021, 22. jan.). Inflation Expectations in Latvia: Consumer Survey Based Results. Taken from https://www.macroeconomics.lv/node/2617
MLA: Paula, Daina. Beņkovskis, Konstantīns. "Inflation Expectations in Latvia: Consumer Survey Based Results" www.macroeconomics.lv. Tīmeklis. 22.01.2021. <https://www.macroeconomics.lv/node/2617>.
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