Empirical Estimates of Changing Inflation Dynamics

52 Pages Posted: 13 Jul 2009

See all articles by Jeffrey C. Fuhrer

Jeffrey C. Fuhrer

Federal Reserve Bank of Boston; Harvard University - Harvard Kennedy School (HKS)

Giovanni Olivei

Federal Reserve Bank of Boston

Geoffrey M. B. Tootell

Federal Reserve Banks - Federal Reserve Bank of Boston

Date Written: May 1, 2009

Abstract

This paper provides an array of empirical evidence bearing on potentially important changes in the dynamics of U.S. inflation. We examine the overall performance of Phillips curves relative to some well-known benchmarks, the efficiency with which the Federal Reserve’s Greenbook forecasts of inflation use real activity information, and shifts in the key determinants of the reduced-form 'triangle model' of inflation. We develop a structural model-based interpretation of observed reduced-form shifts and conduct a reduced-form assessment of the relationship between core and headline measures of inflation, centering on the persistent 'pass-through' of relative price changes into core and headline inflation measures, and a parallel exercise that examines the pass-through of key relative price changes into wage and compensation measures.

JEL Classification: E5, E31, E37

Suggested Citation

Fuhrer, Jeffrey C. and Olivei, Giovanni and Tootell, Geoffrey M.B., Empirical Estimates of Changing Inflation Dynamics (May 1, 2009). FRB of Boston Working Paper No. 09-4. Available at SSRN: https://ssrn.com/abstract=1432487 or http://dx.doi.org/10.2139/ssrn.1432487

Jeffrey C. Fuhrer (Contact Author)

Federal Reserve Bank of Boston ( email )

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Harvard University - Harvard Kennedy School (HKS) ( email )

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Giovanni Olivei

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Geoffrey M.B. Tootell

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
(617) 973-3430 (Phone)

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