https://macropaperwarehouse.com/authors/william-a.-branch/William A. BranchHugo -- gohugo.ioen-usThu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/identifying-the-impact-of-inflation-expectations/Thu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/identifying-the-impact-of-inflation-expectations/<p>Branch (2022) asks whether subjective consumer inflation expectations causally raise the inflation rate — a question whose empirical answer has been elusive despite its central role in New Keynesian theory and central bank communication. The identification problem is acute: expectations are endogenous by construction, and the standard approach of estimating a Phillips curve with aggregate data produces estimates biased sharply downward by endogeneity. OLS regressions of regional inflation on regional mean expectations, controlling for unemployment, lagged inflation, and region and time fixed effects, yield a slope of only 0.069 (Table 2 context; Figure 1b), far below the theoretical prior of near-unity pass-through.</p>