A New Model of Inflation, Trend Inflation, and Long‐Run Inflation Expectations

Joshua Chan, Todd Clark and Gary Koop

Journal of Money, Credit and Banking, 2018, vol. 50, issue 1, 5-53

Abstract: This paper develops a bivariate model of inflation and a survey‐based long‐run forecast of inflation that allows for the estimation of the link between trend inflation and the long‐run forecast. Thus, our model allows for the possibilities that long‐run forecasts taken from surveys can be equated with trend inflation, that the two are completely unrelated, or anything in between. Using a variety of inflation measures and survey‐based forecasts for several countries, we find that long‐run forecasts can provide substantial help in refining estimates and fitting and forecasting inflation. It is less helpful to simply equate trend inflation with the long‐run forecasts.

Date: 2018
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https://doi.org/10.1111/jmcb.12452

Related works:
Working Paper: A New Model of Inflation, Trend Inflation, and Long-Run Inflation Expectations (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:50:y:2018:i:1:p:5-53

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