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Does the Fed Control Trend Inflation?

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  • William J. Crowder

    (Department of Economics, University of Texas at Arlington)

Abstract

The inability of central banks around the globe to increase the rate of inflation within their economies is becoming a serious concern for policy makers. In response to the financial crisis central banks expanded their balance sheets to unprecedented levels and the impact on inflation has been negligible. The failure of standard policy responses to ignite inflation has led several to call for alternative strategies like the Neo-Fisher hypothesis. We test for the necessary causal linkages using a cointegrated structural vector error correction model to determine how much control the Federal Reserve has over the trend rate of inflation in the U.S.

Suggested Citation

  • William J. Crowder, 2020. "Does the Fed Control Trend Inflation?," Annals of Economics and Finance, Society for AEF, vol. 21(2), pages 241-261, November.
    • Handle: RePEc:cuf:journl:y:2020:v:21:i:2:crowder
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    References listed on IDEAS

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    More about this item

    Keywords

    Neo-Fisher Hypothesis; Long-Run Causality;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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