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The role of expectations and output in the inflation process: an empirical assessment

Author

Listed:
  • Jeffrey C. Fuhrer
  • Giovanni P. Olivei

Abstract

This brief examines two issues of current interest concerning inflation: (1) whether \\"well-anchored\\" expectations will help to restrain inflation's decline and whether an \\"un-anchoring\\" of expectations could lead to undesirably high inflation and (2) to what extent output (or utilization) gaps are useful components of empirical models of inflation and, if they are useful, to what extent current gaps might counterbalance the effect of expectations on inflation. The goals of conducting this examination are to articulate a reasonably coherent framework for the discussion, highlight the key areas of uncertainty, and provide new empirical evidence that sheds some light on these areas.

Suggested Citation

  • Jeffrey C. Fuhrer & Giovanni P. Olivei, 2010. "The role of expectations and output in the inflation process: an empirical assessment," Public Policy Brief, Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbpb:y:2010:n:10-2
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    File URL: http://www.bostonfed.org/economic/ppb/2010/ppb102.pdf
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    Citations

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    Cited by:

    1. Andrea Stella & James H. Stock, 2012. "A state-dependent model for inflation forecasting," International Finance Discussion Papers 1062, Board of Governors of the Federal Reserve System (U.S.), revised 2012.
    2. Laurence Ball & Sandeep Mazumder, 2011. "Inflation Dynamics and the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 337-405.
    3. Kichian, Maral & Rumler, Fabio, 2014. "Forecasting Canadian inflation: A semi-structural NKPC approach," Economic Modelling, Elsevier, vol. 43(C), pages 183-191.
    4. Frédérique Bec & Patrick Kanda, 2019. "Is inflation driven by survey-based, VAR-based or myopic expectations?," Working Papers hal-02175836, HAL.
    5. Michael Dotsey & Shigeru Fujita & Tom Stark, 2011. "Do Phillips curves conditionally help to forecast inflation?," Working Papers 11-40, Federal Reserve Bank of Philadelphia, revised 2011.
    6. James H. Stock & Mark W. Watson, 2010. "Modeling inflation after the crisis," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 173-220.
    7. Bec, Frédérique & Kanda, Patrick, 2020. "Is inflation driven by survey-based, VAR-based or myopic expectations? An empirical assessment from US real-time data," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    8. Adam S. Posen, 2010. "The Central Banker's Case for Doing More," Policy Briefs PB10-24, Peterson Institute for International Economics.
    9. Michelle L. Barnes & Fabia Gumbau-Brisa & Denny Lie & Giovanni P. Olivei, 2011. "Estimation of forward-looking relationships in closed form: an application to the New Keynesian Phillips curve," Working Papers 11-3, Federal Reserve Bank of Boston, revised 2011.
    10. Wolfgang Pollan, 2013. "US Inflation and Crude Oil Prices. An International Perspective," WIFO Working Papers 451, WIFO.

    More about this item

    Keywords

    Inflation (Finance);

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