Hasenzagl, T, Pellegrino, F, Reichlin, L and Ricco, G (2022) A Model of the Fed’s View on Inflation. Review of Economics and Statistics, 104 (4). pp. 686-704. ISSN 0034-6535
Abstract
We develop a medium-size semi-structural time series model of inflation dynamics that is consistent with the view – often expressed by central banks – that three components are important: a trend anchored by long-run expectations, a Phillips curve and temporary fluctuations in energy prices. We find that a stable long-term inflation trend and a well identified steep Phillips curve are consistent with the data, but they imply potential output declining since the new millennium and energy prices affecting headline inflation not only via the Phillips curve but also via an independent expectational channel. A high-frequency energy price cycle can be related to global factors affecting the commodity market, and often overpowers the Phillips curve thereby explaining the inflation puzzles of the last ten years.
More Details
Item Type: | Article |
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Subject Areas: | Economics |
Additional Information: |
© 2022 The MIT Press |
Date Deposited: | 05 Nov 2020 15:16 |
Date of first compliant deposit: | 05 Nov 2020 |
Subjects: |
Inflation Simulation models |
Last Modified: | 05 Nov 2024 02:38 |
URI: | https://lbsresearch.london.edu/id/eprint/1541 |