How have inflation dynamics changed over time? : Evidence from the euro area and USA
Oinonen, Sami; Paloviita, Maritta; Vilmi, Lauri (06.05.2013)
Numero
6/2013Julkaisija
Bank of Finland
2013
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-20140807354Tiivistelmä
This paper analyzes euro area and U.S. inflation dynamics since the beginning of the 1990s by estimating New Keynesian hybrid Phillips curves with time-varying parameters. We measure inflation expectations by subjective forecasts from Consensus Economics survey and so do not assume rational expectations. Both rolling regressions and state-space models are employed. The results indicate that in both economic areas the inflation dynamics have steadily become more forward-looking over time. We also provide evidence that the impact of the output gap on inflation has increased in recent years. Overall, diminished inflation persistence emphasizes the role of credible monetary policy in inflation dynamics. JEL Classification: E31, C22, C51 Key words: inflation, Phillips curve, time-varying parameters, survey expectations
Julkaisuhuomautus
Published in the Scandinavian Journal of Economics, Volume 114, Issue 2, pages 601–628, June 2012