The Time-Varying Degree of Inflation Expectations Anchoring

26 Pages Posted: 23 May 2015

See all articles by Till Strohsal

Till Strohsal

Free University of Berlin (FUB) - Division of Economics

Rafi Melnick

Interdisciplinary Center Herzliya

Dieter Nautz

Free University of Berlin (FUB) - Department of Economics

Date Written: May 22, 2015

Abstract

Well-anchored inflation expectations have become a key indicator for the credibility of a central bank’s inflation target. Since the outbreak of the recent financial crisis, the existence and the degree of de-anchoring of U.S. inflation expectations have been under debate. This paper introduces an encompassing time-varying parameter model to analyze the changing degree of U.S. inflation expectations anchoring. We confirm that inflation expectations have been partially de-anchored during the financial crisis. Yet, our results suggest that inflation expectations have been successfully re- anchored ever since.

Keywords: Anchoring of Inflation Expectations, Financial Crisis, Break-Even Inflation Rates, Time-Varying Parameter

JEL Classification: E31, E52, E58, C22

Suggested Citation

Strohsal, Till and Melnick, Rafi and Nautz, Dieter, The Time-Varying Degree of Inflation Expectations Anchoring (May 22, 2015). Available at SSRN: https://ssrn.com/abstract=2609394 or http://dx.doi.org/10.2139/ssrn.2609394

Till Strohsal (Contact Author)

Free University of Berlin (FUB) - Division of Economics ( email )

Boltzmannstr. 20
Berlin 14195, 14195
Germany

HOME PAGE: http://www.wiwiss.fu-berlin.de/fachbereich/vwl/nautz/mitarbeiter/Strohsal/index.html

Rafi Melnick

Interdisciplinary Center Herzliya ( email )

P.O. Box 167
Herzliya, 46150
Israel

Dieter Nautz

Free University of Berlin (FUB) - Department of Economics ( email )

Boltzmannstrasse 20
D-14195 Berlin, 14195
Germany

HOME PAGE: http://www.wiwiss.fu-berlin.de/institute/iso/nautz/mitarbeiter/Nautz.html

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