Abstract

https://ssrn.com/abstract=2910914
 


 



Missing Disinflation and Missing Inflation: The Puzzles that Aren't


Elena Bobeica


European Central Bank (ECB)

Marek Jarocinski


European Central Bank (ECB)

January 25, 2017

ECB Working Paper No. 2000

Abstract:     
In the immediate wake of the Great Recession we didn't see the disinflation that most models predicted and, subsequently, we didn't see the inflation they predicted. We show that these puzzles disappear in a Vector Autoregressive model that properly accounts for domestic and global factors. Such a model reveals, among others, that domestic factors explain much of the inflation dynamics in the 2012-2014 euro area missing inflation episode. Consequently, economists and models that excessively focused on the global nature of inflation were liable to miss the contribution of deflationary domestic shocks during this episode.

Number of Pages in PDF File: 40

Keywords: Inflation Dynamics, International Transmission of Shocks, Phillips curve, Bayesian Vector Autoregression, Conditional Forecast, Shock Identification

JEL Classification: E31, E32, F44


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Date posted: February 3, 2017  

Suggested Citation

Bobeica, Elena and Jarocinski, Marek, Missing Disinflation and Missing Inflation: The Puzzles that Aren't (January 25, 2017). ECB Working Paper No. 2000. Available at SSRN: https://ssrn.com/abstract=2910914

Contact Information

Elena Bobeica (Contact Author)
European Central Bank (ECB) ( email )
Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Marek Jarocinski
European Central Bank (ECB) ( email )
Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 6414 (Phone)

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