Abstract
A new approach is proposed to investigate inflation expectations, which develops classical Phillips curves with the control factors of money, house prices, and interest rates. We find that (1) annual inflation rate is no more than 3 % in 2012 if real money growth is kept less than 14% and real house price index and real interest rate are both in [− 1 %, 1 %], which means the inflation targeting by the government can be implemented. However, if real money growth increases by 14 % and real house price index and real interest rate both increases by 1 %, inflation rate will reach 5.2 % in 2013Q2. (2) Interest rates rule is more effective in managing inflation expectations among money, house prices and interest rates policy. While effecting directly inflation, house prices are more significant than interest rates
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