The Dynamics of UK and US Inflation Expectations*

Deborah Gefang, Gary Koop and Simon Potter

No 1120, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: This paper investigates the relationship between short term and long term inflation expectations in the US and the UK with a focus on inflation pass through (i.e. how changes in short term expectations affect long term expectations). An econometric methodology is used which allows us to uncover the relationship between inflation pass through and various explanatory variables. We relate our empirical results to theoretical models of anchored, contained and unmoored inflation expectations. For neither country do we find anchored or unmoored inflation expectations. For the US, contained inflation expectations are found. For the UK, our findings are not consistent with the specific model of contained inflation expectations presented here, but are consistent with a more broad view of expectations being constrained by the existence of an inflation target.

Keywords: smoothly mixing regression; inflation pass through; Bayesian (search for similar items in EconPapers)
JEL-codes: C11 C24 E37 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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http://www.strath.ac.uk/media/1newwebsite/departme ... 2011/11-20_Final.pdf (application/pdf)

Related works:
Journal Article: The dynamics of UK and US inflation expectations (2012)
Working Paper: The Dynamics of UK and US Inflation Expectation (2012)
Working Paper: The Dynamics of UK and US Inflation Expectations (2011)
Working Paper: The Dynamics of UK and US Inflation Expectations (2009)
Working Paper: The Dynamics of UK and US Inflation Expectations (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:1120

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