under an inflation targeting regime. For example, even with an inflation targeting framework, expectations were not well anchored in New Zealand when forecasters did not understand the central bank’s objective function (Kumar et al. 2015). Inflation expectations in 10 advanced economies were not as well anchored during periods of persistently below-target inflation as during periods when inflation was close to target (Ehrmann 2015).

Several studies have examined whether inflation expectations became unanchored during and after the global financial crisis, which was followed by a wave of unconventional monetary policy actions. During the period immediately following the crisis, market-based inflation expectations in the United States and the United Kingdom became more sensitive to macroeconomic news, but neither survey-based nor market-based long-term inflation expectations in the Euro Area became unanchored (Galati, Heemeijer, and Moessner 2011; Galati, Poelhekke, and Zhou 2011).

During a longer post-crisis period in the Euro Area, when inflation fell and was persistently below target, there is evidence that the anchoring of inflation expectations weakened (Grishchenko, Mouabbi, and Renne 2017; Garcia and Werner 2018). The findings, which are based on different methodologies and different measures of inflation expectations, are less consistent for the United States, where anchoring is alternately found to have improved and deteriorated significantly in the post-crisis period (Ciccarelli, Garcia, and Montes-Galdón 2017; Grishchenko, Mouabbi, and Renne 2017). Overall, given the size of the shocks during the crisis, expectations in advanced economies remained fairly well anchored (Miles et al. 2017).<sup>17</sup> Anchoring of inflation expectations in EMDEs. Evidence on the anchoring of inflation expectations in EMDEs is more limited, but some studies suggest that inflation targeting plays a role (Appendix 2). Using monthly survey data from Consensus Economics for a sample of 22 EMDEs and 14 advanced economies in a structural vector autoregressive model, Davis (2014) finds evidence that the introduction of inflation targeting is associated with a statistically significant reduction in the response of 12-month-ahead inflation expectations to shocks in both oil prices and observed inflation. Using market-based measures of inflation expectations for Brazil, Chile, and Mexico, De Pooter et al. (2014) document that long-term inflation expectations became better anchored in these countries over the preceding decade, especially in Chile and Mexico. Although they do not specifically test for the role of inflation targeting, they ascribe this result to recent improvements in the credibility of these countries’ central banks.

IMF (2016) estimates a hybrid New Keynesian Phillips curve using data from a large sample of countries (24 advanced economies and 20 EMDEs). It reports that although the coefficient on lagged inflation (backward-looking expectations) started declining in the early 2000s, there was a reversal in this trend in the aftermath of the Great Recession, with the coefficient returning close to its value in the early 1990s. This study also finds that the sensitivity of inflation expectations to macroeconomic news (proxied by the difference between expected and realized inflation) is negatively correlated with standard measures of central bank independence and transparency, and that expectations become

> 17 Strohsal and Winkelmann (2015) examine the anchoring of inflation expectations, as well as the sensitivity to news shocks, using a sample of four advanced economies. They find that the degree of anchoring did not change during the crisis.

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