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The time-varying degree of inflation expectations anchoring

Till Strohsal, Rafi Melnick and Dieter Nautz ()

Journal of Macroeconomics, 2016, vol. 48, issue C, 62-71

Abstract: Well-anchored inflation expectations have become a key indicator for the credibility of a central bank’s inflation target. Since the outbreak of the financial crisis, the (de-)anchoring of long-term U.S. inflation expectations has been under debate. We propose a time-varying parameter (TVP) model in order to explore gradual changes in central bank credibility and the corresponding degree of inflation expectations anchoring. Our results confirm that inflation expectations have been partially de-anchored during the financial crisis. However, the TVP model reveals that inflation expectations have been successfully re-anchored ever since.

Keywords: Anchoring of inflation expectations; Financial crisis; Break-even inflation rates; Time-varying parameter (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 C22 (search for similar items in EconPapers)
Date: 2016
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Working Paper: The Time-Varying Degree of Inflation Expectations Anchoring (2015) Downloads
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Handle: RePEc:eee:jmacro:v:48:y:2016:i:c:p:62-71