The Dynamics of UK and US Inflation Expectations

Gary Koop, Deborah Gefang, Simon M. Potter

Research output: Working paperDiscussion paper

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.
LanguageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-34
Number of pages35
Volume11
Publication statusPublished - Dec 2008

Fingerprint

Inflation expectations
Pass-through
Inflation
Econometric methodology
Empirical results
Inflation target

Keywords

  • inflation
  • inflation pass through
  • econometric
  • anchored inflation
  • contained inflation
  • unmoored inflation

Cite this

Koop, G., Gefang, D., & Potter, S. M. (2008). The Dynamics of UK and US Inflation Expectations. (20 ed.) (pp. 1-34). Glasgow: University of Strathclyde.
Koop, Gary ; Gefang, Deborah ; Potter, Simon M. / The Dynamics of UK and US Inflation Expectations. 20. ed. Glasgow : University of Strathclyde, 2008. pp. 1-34
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Koop, G, Gefang, D & Potter, SM 2008 'The Dynamics of UK and US Inflation Expectations' 20 edn, University of Strathclyde, Glasgow, pp. 1-34.

The Dynamics of UK and US Inflation Expectations. / Koop, Gary; Gefang, Deborah; Potter, Simon M.

20. ed. Glasgow : University of Strathclyde, 2008. p. 1-34.

Research output: Working paperDiscussion paper

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N2 - 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.

AB - 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.

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Koop G, Gefang D, Potter SM. The Dynamics of UK and US Inflation Expectations. 20 ed. Glasgow: University of Strathclyde. 2008 Dec, p. 1-34.