Inflation Persistence

Fuhrer, Jeffrey C.

doi:10.2139/ssrn.1520513

Cited by 248 publications

(405 citation statements)

References 59 publications

Supporting

Mentioning

381

Contrasting

Unclassified

Order By: Relevance

“…1 E¤orts to "…x up" the standard NKPC have generally involved the introduction of lagged in ‡ation (or some function thereof) into the equilibrium law of motion. Modi…ed versions of the NKPC have been motivated by the presence of some backward-looking agents (Roberts 1997, Galí andGertler 1999), alternative wage contracts (Buiter andJewitt 1981, Fuhrer andMoore 1995), the use of backward-looking price indexation by …rms (Woodford 2003, Christiano, Eichenbaum, andEvans 2005), sticky information adjustment (Mankiw and Reis 2002), learning or signal extraction about the central bank's in ‡ation target or other fundamentals (Erceg andLevin 2003, Collard andDellas 2005), and continuously evolving but nevertheless unanticipated shifts in the in ‡ation target Tinsley 2002, Cogley andSbordone 2005).…”

Section: Overviewmentioning

confidence: 99%

Time-varying U.S. inflation dynamics and the New Keynesian Phillips curve

Lansing

2009

Review of Economic Dynamics

View full text Add to dashboard Cite

This paper introduces a form of boundedly-rational expectations into an otherwise standard New Keynesian Phillips curve. The representative agent's perceived law of motion allows for both temporary and permanent shocks to in ‡ation, the latter intended to capture the possibility of evolving shifts in the central bank's in ‡ation target. The agent's perceived optimal forecast rule de…ned by the Kalman …lter is parameterized to be consistent with the observed moments of the in ‡ation time series. From the agent's perspective, the use of a variable Kalman gain parameter is justi…ed by movements in the perceived "signalto-noise ratio," which measures the relative variances of the permanent and temporary shocks to in ‡ation. I show that this simple model of in ‡ation expectations can generate time-varying in ‡ation dynamics similar to those observed in long-run U.S. data. The U.S. signal-to-noise ratio identi…ed using the model's methodology exhibits an upward drift during the 1970s, followed by downward drift from the mid-1990s onwards. This pattern suggests that the perceived signal-to-noise ratio might be viewed as a inverse measure of the central bank's credibility for maintaining a constant in ‡ation target. Model-based values for expected in ‡ation track quite well with movements in survey-based measures of U.S. expected in ‡ation.

show abstract

Section: Overviewmentioning

confidence: 99%

Time-varying U.S. inflation dynamics and the New Keynesian Phillips curve

Lansing

2009

Review of Economic Dynamics

View full text Add to dashboard Cite

show abstract

“…Barring the differences as to what constitutes the driving variable, this specification nests other forms of Phillips curve developed in the literature. 8 For example, if γ b = 1 and γ f = 0 then it leads to basic adaptive expectations Phillips curve with dominant inflation stickiness ( Fuhrer and Moore 1995;Fuhrer 1997;Rudebusch 2002;Lindé 2005;Roberts 2005). Alternatively, if γ b = 0 and γ f = 1 it leads to a pure forward-looking NKPC formulation.…”

Section: Literature Reviewmentioning

confidence: 99%

Estimating the New Keynesian Phillips Curve for the UK: evidence from the inflation-indexed bonds market

Marfatia

2017

The B.E. Journal of Macroeconomics

View full text Add to dashboard Cite

Abstract:This paper utilizes the information in the inflation-indexed bonds market to estimate the New Keynesian Phillips Curve for the UK using an unobserved component approach. The main advantage of this approach comes from using the Kalman filter to explicitly estimate the unobserved expected inflation from the observed break-even inflation rates -the yield difference between the inflation-indexed bonds and the nominal bonds. Our results show that the expected inflation estimated from the unobserved component model plays a significant role in explaining the inflation dynamics in the UK. The evidence also suggests that the estimated inflation expectations are better able to capture the evolution of actual inflation process as compared to the break-even inflation rate as a proxy for expected inflation.

show abstract

“…In particular, the NKPC does not capture the empirical observation that inflation is highly persistent (see Fuhrer and Moore, 1995). Galí and Gertler (1999) provide a theoretical framework for the hybrid model by dividing firms into two categories.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Modelling inflation in China—A regional perspective

Mehrotra

Peltonen

Rivera

2010

China Economic Review

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract 4 Non-technical summary 5 Terms of use: Documents in

show abstract

Inflation Persistence

Cited by 248 publications

References 59 publications

Time-varying U.S. inflation dynamics and the New Keynesian Phillips curve

Time-varying U.S. inflation dynamics and the New Keynesian Phillips curve

Estimating the New Keynesian Phillips Curve for the UK: evidence from the inflation-indexed bonds market

Modelling inflation in China—A regional perspective

Contact Info

Product

Resources

About