Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Measuring Inflation Anchoring and Uncertainty : A US and Euro Area Comparison
We use several US and euro-area surveys of professional forecasters to estimate a dynamic factor model of inflation featuring time-varying uncertainty. We obtain survey-consistent distributions of future inflation at any horizon, both in the US and the euro area. Equipped with this model, we propose a novel measure of the anchoring of inflation expectations that accounts for inflation uncertainty. Our results suggest that following the Great Recession, inflation anchoring improved in the US, while mild de-anchoring occurred in the euro-area. As of our sample end, both areas appear to be equally anchored.
Cite this item
Olesya V. Grishchenko & Sarah Mouabbi & Jean-Paul Renne, Measuring Inflation Anchoring and Uncertainty : A US and Euro Area Comparison, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2017-102, 03 Oct 2017.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
Keywords: Anchoring of inflation expectations ; Dynamic factor model ; Inflation ; Stochastic volatility ; Surveys of professional forecasters ; Term structure of inflation expectations and inflation uncertainty
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