TY - UNPB
T1 - Trend Inflation and Inflation Compensation
AU - Poon, Aubrey
AU - Garcia, Juan Angel
N1 - IMF Working Paper No. WP/18/154
PY - 2018/6/30
Y1 - 2018/6/30
N2 - This paper incorporates market-based inflation expectations to the growing literature on trend inflation estimation, and finds that there has been a significant decline in euro area trend inflation since 2013. This finding is robust to using different measures of long-term inflation expectations in the estimation, both market-based and surveys. That evidence:(i) supports the expansion of ECB’s UMP measures since 2015;(ii) provides a metric to monitor long-term inflation expectations following their introduction, and the likelihood of a sustained return of inflation towards levels below but close to 2% over the medium term.
AB - This paper incorporates market-based inflation expectations to the growing literature on trend inflation estimation, and finds that there has been a significant decline in euro area trend inflation since 2013. This finding is robust to using different measures of long-term inflation expectations in the estimation, both market-based and surveys. That evidence:(i) supports the expansion of ECB’s UMP measures since 2015;(ii) provides a metric to monitor long-term inflation expectations following their introduction, and the likelihood of a sustained return of inflation towards levels below but close to 2% over the medium term.
KW - trend inflation
KW - market-based inflation expectations
KW - state space model
KW - stochastic volatility
UR - https://www.imf.org/en/Publications/WP/Issues/2018/07/06/Trend-Inflation-and-Inflation-Compensation-45974
M3 - Working paper
SN - 9781484362402
SP - 1
EP - 45
BT - Trend Inflation and Inflation Compensation
CY - Washington D.C.
ER -