Has trend inflation shifted?: An empirical analysis with an equally-spaced regime-switching model

Sohei Kaihatsu and Jouchi Nakajima

Economic Analysis and Policy, 2018, vol. 59, issue C, 69-83

Abstract: This paper proposes a new econometric framework for estimating trend inflation and the slope of the Phillips curve with a regime-switching model. A unique aspect of our approach is to assume equally-spaced regimes. In our baseline model, we specify regimes for the trend inflation at one-percent intervals. This framework serves as a parsimonious trend inflation model, and the estimated probability of the trend inflation being in each regime provides an easily interpretable illustration in policy debate and analysis. An empirical result for the United States shows a considerably stable trend inflation at two percent since the late 1990s. A result for Japan indicates that the trend inflation stayed at zero percent for about 15 years after the late 1990s, and then shifted away from zero percent after the introduction of the price stability target and the quantitative and qualitative monetary easing in 2013.

Keywords: Phillips curve; Regime-switching model; Trend inflation (search for similar items in EconPapers)
JEL-codes: C22 E31 E42 E52 E58 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592618300067
Full text for ScienceDirect subscribers only

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:eee:ecanpo:v:59:y:2018:i:c:p:69-83

DOI: 10.1016/j.eap.2018.04.003

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().