Measuring inflation expectations uncertainty using high-frequency data

Joshua Chan and Yong Song

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Inflation expectations play a key role in determining future economic outcomes. The associated uncertainty provides a direct gauge of how well-anchored the inflation expectations are. We construct a model-based measure of inflation expectations uncertainty by augmenting a standard unobserved components model of inflation with information from noisy and possibly biased measures of inflation expectations obtained from financial markets. This new model-based measure of inflation expectations uncertainty is more accurately estimated and can provide valuable information for policymakers. Using US data, we find significant changes in inflation expectations uncertainty during the Great Recession.

Keywords: Trend inflation; inflation expectations; stochastic volatility (search for similar items in EconPapers)
JEL-codes: C11 C32 E31 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2017-10
New Economics Papers: this item is included in nep-ecm, nep-mac, nep-mon and nep-mst
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Measuring Inflation Expectations Uncertainty Using High‐Frequency Data (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2017-61

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