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Author: Monica Jain
Publisher:
ISBN:
Category :
Languages : en
Pages : 252
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Book Description
This dissertation presents a new measure of U.S. inflation persistence from the point of view of a professional forecaster. In chapter 2 I explore two different measures that give insight into the views of professional forecasters and link their views with U.S. inflation data. One of these measures, given by the persistence implied by forecast revisions, appears to have similarities with actual inflation persistence over the 1981-2008 sample period. Chapter 3 explores forecast revisions in a more general setting allowing forecasters to have their own views on inflation persistence as well as a unique information set. This chapter builds a measure of perceived inflation persistence via the implied autocorrelation function that follows from the estimates obtained using a forecaster-specific state-space model. When compared to the autocorrelation function for actual inflation, forecasters tend to react less to shocks that hit inflation than the actual inflation data would suggest. This could be due to increased credibility of the Federal Reserve, but it could also be a result of a bias in the underlying inflation forecasts. Chapter 4 focuses on this issue and finds that the reluctance of forecasters to make revisions to their previously announced forecasts causes their estimates of perceived inflation persistence to be understated as their announced inflation forecasts differ from their true inflation expectations. This chapter also presents a method to undo this bias by retrieving their true inflation expectations series.
Author: Monica Jain
Publisher:
ISBN:
Category :
Languages : en
Pages : 252
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Book Description
This dissertation presents a new measure of U.S. inflation persistence from the point of view of a professional forecaster. In chapter 2 I explore two different measures that give insight into the views of professional forecasters and link their views with U.S. inflation data. One of these measures, given by the persistence implied by forecast revisions, appears to have similarities with actual inflation persistence over the 1981-2008 sample period. Chapter 3 explores forecast revisions in a more general setting allowing forecasters to have their own views on inflation persistence as well as a unique information set. This chapter builds a measure of perceived inflation persistence via the implied autocorrelation function that follows from the estimates obtained using a forecaster-specific state-space model. When compared to the autocorrelation function for actual inflation, forecasters tend to react less to shocks that hit inflation than the actual inflation data would suggest. This could be due to increased credibility of the Federal Reserve, but it could also be a result of a bias in the underlying inflation forecasts. Chapter 4 focuses on this issue and finds that the reluctance of forecasters to make revisions to their previously announced forecasts causes their estimates of perceived inflation persistence to be understated as their announced inflation forecasts differ from their true inflation expectations. This chapter also presents a method to undo this bias by retrieving their true inflation expectations series.
Author: Mr.Rudolfs Bems
Publisher: International Monetary Fund
ISBN: 148439223X
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989. We then study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates. We find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored.
Author: Mr.Rudolfs Bems
Publisher: International Monetary Fund
ISBN: 1484388844
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989. We then study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates. We find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored.
Author: Peter J. N. Sinclair
Publisher: Routledge
ISBN: 1135179778
Category : Business & Economics
Languages : en
Pages : 402
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Book Description
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Author: Sharon Kozicki
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 31
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Book Description
"Surveys provide direct information on expectations, but only short histories are available at quarterly frequencies or for long-horizon expectations. Longer histories typically contain only semi-annual observations of short-horizon forecasts. The authors fill in the gaps by constructing a 50-year monthly history of expected inflation at all horizons from one month to 10 years that is consistent with inflation data and infrequent survey data. In the process, some models that fit inflation well are found to generate forecasts that bear little resemblance to survey data. Also, survey data on near-term expectations are found to contain considerable information about longhorizon views. The estimated long-horizon forecast series, a measure of the private sector's perception of the inflation target of monetary policy, has shifted considerably over time and is the source of some of the persistence of inflation. When compared with estimates of the effective inflation goal of policy, these perceptions suggest that monetary policy has been less than fully credible historically" - abstract.
Author: Mr. Luis Brandão-Marques
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 32
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Book Description
When uncertain about inflation persistence, central banks are well-advised to adopt a robust strategy when setting interest rates. This robust approach, characterized by a "better safe than sorry" philosophy, entails incurring a modest cost to safeguard against a protracted period of deviating inflation. Applied to the post-pandemic period of exceptional uncertainty and elevated inflation, this strategy would have called for a tightening bias. Specifically, a high level of uncertainty surrounding wage, profit, and price dynamics requires a more front-loaded increase in interest rates compared to a baseline scenario which the policymaker fully understands how shocks to those variables are transmitted to inflation and output. This paper provides empirical evidence of such uncertainty and estimates a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model for the euro area to derive a robust interest rate path for the ECB which serves to illustrate the case for insuring against inflation turning out to have greater persistence.
Author: Ruediger Bachmann
Publisher: Elsevier
ISBN: 0128234768
Category : Business & Economics
Languages : en
Pages : 876
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Book Description
Handbook of Economic Expectations discusses the state-of-the-art in the collection, study and use of expectations data in economics, including the modelling of expectations formation and updating, as well as open questions and directions for future research. The book spans a broad range of fields, approaches and applications using data on subjective expectations that allows us to make progress on fundamental questions around the formation and updating of expectations by economic agents and their information sets. The information included will help us study heterogeneity and potential biases in expectations and analyze impacts on behavior and decision-making under uncertainty. - Combines information about the creation of economic expectations and their theories, applications and likely futures - Provides a comprehensive summary of economics expectations literature - Explores empirical and theoretical dimensions of expectations and their relevance to a wide array of subfields in economics
Author: William R. Melick
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 34
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Book Description
This paper reviews analytical work carried out by central banks that participated in the Autumn Meeting of Central Bank Economists on "The evolving inflation process" which the BIS hosted on 28-29 October 2005. The paper first discusses efforts to document the univariate statistical properties of inflation and how they have changed over the last decades. It then reviews studies of disaggregated or micro inflation data and evidence from surveys of firms concerning their pricing behaviour. Using this micro evidence as background, the paper also attempts to understand the proximate causes for any changes in the inflation process, such as disparities in the price behaviour of tradables and non-tradables or movements in energy prices. The paper then summarises central bank research on changes in the ultimate determinants of factors impinging on the inflation process, for example a changing monetary policy regime, increased globalisation or a legislative reform of the labour market.
Author: Ben S. Bernanke
Publisher: University of Chicago Press
ISBN: 0226044734
Category : Business & Economics
Languages : en
Pages : 469
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Book Description
Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.
Author: Mr. Kangni R Kpodar
Publisher: International Monetary Fund
ISBN: 1616356154
Category : Business & Economics
Languages : en
Pages : 34
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Book Description
This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
