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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 ...