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Title: Inflation expectations, labour markets and EMU
Author: Curto Millet, Fabien
Awarding Body: University of Oxford
Current Institution: University of Oxford
Date of Award: 2007
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This thesis examines the measurement, applications and properties of consumer inflation expectations in the context of eight European Union countries: France, Germany, the UK, Spain, Italy, Belgium, the Netherlands and Sweden. The data proceed mainly from the European Commission's Consumer Survey and are qualitative in nature, therefore requiring quantification prior to use. This study first seeks to determine the optimal quantification methodology among a set of approaches spanning three traditions, associated with Carlson-Parkin (1975), Pesaran (1984) and Seitz (1988). The success of a quantification methodology is assessed on the basis of its ability to match quantitative expectations data and on its behaviour in an important economic application, namely the modelling of wages for our sample countries. The wage equation developed here draws on the theoretical background of the staggered contracts and the wage bargaining literature, and controls carefully for inflation expectations and institutional variables. The Carlson-Parkin variation proposed in Curto Millet (2004) was found to be the most satisfactory. This being established, the wage equations are used to test the hypothesis that the advent of EMU generated an increase in labour market flexibility, which would be reflected in structural breaks. The hypothesis is essentially rejected. Finally, the properties of inflation expectations and perceptions themselves are examined, especially in the context of EMU. Both the rational expectations and rational perceptions hypotheses are rejected. Popular expectations mechanisms, such as the "rule-of-thumb" model or Akerlof et al.'s (2000) "near-rationality hypothesis" are similarly unsupported. On the other hand, evidence is found for the transmission of expert forecasts to consumer expectations in the case of the UK, as in Carroll's (2003) model. The distribution of consumer expectations and perceptions is also considered, showing a tendency for gradual (as in Mankiw and Reis, 2002) but non-rational adjustment. Expectations formation is further shown to have important qualitative features.
Supervisor: Muellbauer, John Sponsor: Scatcherd European Scholarship ; Department of Economics ; University of Oxford
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Economics ; Economic history ; Labour economics ; Macro and international economics ; Econometrics ; inflation ; inflation expectations ; expectations ; inflation perceptions ; perceptions ; survey data ; quantification ; wage equations ; labour markets ; labor markets ; euro ; flexibility ; competitiveness ; labour market institutions ; institutions ; rationality ; Phillips curve ; consumers ; expert forecasts ; expectations distribution ; distribution ; inflation targeting ; prices ; deflation ; wages ; productivity ; unemployment ; wage level ; wage differentials ; compensation ; benefits ; labor costs ; nonwage labor costs ; public policy ; unions ; trade unions ; collective bargaining ; monetary policy ; central banks ; macroeconomics ; policy design ; applied econometrics ; policy coordination ; credibility ; exchange rate mechanism ; forecasting ; equilibrium correction models ; time series ; survey methods ; econometric modeling ; Europe ; European Union ; European Monetary Union