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Inflation Expectations In The Euro Area: Are Consumers Rational?

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Executive Summary

In this paper, the author proposes a quantitative measure for inflation expectations based on consumer survey data. Thereafter, the author proceeds to testing the rationality assumption. This paper is of noteworthy interest in its own as it is commonly assumed in the theoretical modeling literature that the rational expectations hypothesis holds. This analysis is conducted for the euro area as a whole, as well as for several member countries, using a sample covering the last two decades.

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