Have Inflation Expectations Become Un-anchored? The Role of Oil Prices and Global Aggregate Demand

Nathan Sussman and Osnat Zohar

International Journal of Central Banking, 2022, vol. 18, issue 2, 149-192

Abstract: Beginning with the global financial crisis (2008), the correlation between crude oil prices and medium-term and forward inflation expectations increased, leading to fears of their unanchoring. Using the first principal component of commodity prices as a measure for global aggregate demand, we decompose nominal oil prices to a global demand factor and an idiosyncratic factor. In a Phillips-curve framework, we find a structural change after the collapse of Lehman Brothers when inflation expectations reacted more strongly to global aggregate demand conditions. Within this framework, we find no evidence that expectations became un-anchored.

JEL-codes: E31 E32 E52 E58 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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