EconPapers    
Economics at your fingertips  
 

Inflation dynamics during the Financial Crisis in Europe: cross-sectional identification of long-run inflation expectations

Dany-Knedlik, Geraldine and Oliver Holtemöller

Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association

Abstract: We investigate drivers of Euro area inflation dynamics using a panel of regional Phillips curves and identify long-run inflation expectations by exploiting the cross-sectional dimension of the data. Our approach simultaneously allows for the inclusion of country-specific inflation and unemployment-gaps, as well as time-varying parameters. Our preferred panel specification outperforms various aggregate, uni- and multivariate unobserved component models in terms of forecast accuracy. We find that declining long-run trend inflation expectations and rising inflation persistence indicate an altered risk of inflation expectations de-anchoring. Lower trend inflation, and persistently negative unemployment-gaps, a slightly increasing Phillips curve slope and the downward pressure of low oil prices mainly explain the low inflation rate during the recent years.

Keywords: inflation dynamics; inflation expectations; trend inflation; nonlinear state space model; panel UCSV model; Euro area (search for similar items in EconPapers)
JEL-codes: C32 C33 E31 E5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/181520/1/VfS-2018-pid-12609.pdf (application/pdf)

Related works:
Working Paper: Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc18:181520

Access Statistics for this paper

More papers in Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2019-10-05
Handle: RePEc:zbw:vfsc18:181520