Trend Inflation and Inflation Compensation

Juan Angel Garcia and Aubrey Poon

No 2018/154, IMF Working Papers from International Monetary Fund

Abstract: This paper incorporates market-based inflation expectations to the growing literature on trend inflation estimation, and finds that there has been a significant decline in euro area trend inflation since 2013. This finding is robust to using different measures of long-term inflation expectations in the estimation, both market-based and surveys. That evidence: (i) supports the expansion of ECB’s UMP measures since 2015; (ii) provides a metric to monitor long-term inflation expectations following their introduction, and the likelihood of a sustained return of inflation towards levels below, but close to, 2% over the medium term

Keywords: WP; inflation expectation; trend inflation; market-based inflation expectations; state space model; stochastic volatility; inflation compensation; swap rate; IL swap market; Inflation; Return on investment; Global financial crisis of 2008-2009; Inflation persistence; Global (search for similar items in EconPapers)
Pages: 45
Date: 2018-07-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=45974 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2018/154

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().