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    Bank of Finland, Rauhankatu 19 B, Helsinki

Mirko Wiederholt (Goethe University Frankfurt): Empirical properties of inflation expectations and the zero lower bound


Survey inflation expectations adjust slowly after shocks and are heterogeneous. The paper therefore solves a New Keynesian model with dispersed information on the household side. The information friction changes results regarding shock propagation and policy effectiveness at the zero lower bound on nominal interest rates. The deflationary spiral in bad states of the world takes off slowly. Communication about the aggregate state affects consumption (and the sign of this effect reverses when the zero lower bound binds). Forward guidance and fiscal policy are less powerful. The effects of dispersed information are larger in states with a smaller prior probability.


Research seminars organised by the Bank of Finland's research unit are held on Thursdays at 10:30–12:00 in Rauhankatu 19, 3rd floor big meeting room (unless indicated otherwise). Seminars are held in English.

Research seminars are open to all economists (unless indicated otherwise). Please register in advance at research(at)bof.fi by noon of the preceding day. Visitors will be escorted from Rauhankatu 19 B (Kirjasto/Library) entrance to the seminar room 10 minutes before the seminar.