A Model of the Fed's View on Inflation

Thomas Hasenzagl, Filippo Pellegrino, Lucrezia Reichlin and Giovanni Ricco ()

The Review of Economics and Statistics, 2022, vol. 104, issue 4, 686-704

Abstract: We develop a medium-size semistructural time series model of inflation dynamics that is consistent with the view, often expressed by central banks, that three components are important: a trend anchored by long-run expectations, a Phillips curve, and temporary fluctuations in energy prices. We find that a stable long-term inflation trend and a well-identified steep Phillips curve are consistent with the data, but they imply potential output declining since the new millennium and energy prices affecting headline inflation not only via the Phillips curve but also via an independent expectational channel.

Date: 2022
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Related works:
Working Paper: A Model of the Fed's View on Inflation (2020)
Working Paper: A Model of the Fed's View on Inflation (2018)
Working Paper: A model of FED'S view on inflation (2018)
Working Paper: A model of the FED's view on inflation (2018)
Working Paper: A Model of the Fed’s View on Inflation (2017)
Working Paper: A Model of the Fed’s View on Inflation (2017)
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