Estimation of Historical Inflation Expectations

42 Pages Posted: 9 Jun 2016

See all articles by Carola Binder

Carola Binder

Haverford College - Department of Economics

Date Written: January 21, 2016


Expected inflation is a central variable in economic theory. Economic historians have estimated historical inflation expectations for a variety of purposes, including studies of the Fisher effect, the debt deflation hypothesis, central bank credibility, and expectations formation. I survey the statistical, narrative, and market-based approaches that have been used to estimate inflation expectations in historical eras, including the classical gold standard era, the hyperinflations of the 1920s, and the Great Depression, highlighting key methodological considerations and identifying areas that warrant further research. A meta-analysis of inflation expectations at the onset of the Great Depression reveals that the deflation of the early 1930s was mostly unanticipated, supporting the debt deflation hypothesis, and shows how these results are sensitive to estimation methodology.

Keywords: inflation, Fisher effect, gold standard, hyperinflation, Great Depression, rational expectations, debt deflation

JEL Classification: N11, N12, N13, N14, E30, E31, D84

Suggested Citation

Binder, Carola, Estimation of Historical Inflation Expectations (January 21, 2016). Explorations in Economic History, Forthcoming, Available at SSRN:

Carola Binder (Contact Author)

Haverford College - Department of Economics ( email )

Haverford, PA 19041
United States

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