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Differing views on long-term inflation expectations

Author

Listed:
  • Jens H. E. Christensen
  • Jose A. Lopez

Abstract

Persistently low price inflation, falling energy prices, and a strengthening dollar have helped push down market-based measures of long-term inflation compensation over the past two years. The decline in inflation compensation could reflect a lower appetite for risk among investors or decreased market liquidity. A third alternative supported by recent research suggests that the decline reflects lower long-term inflation expectations among investors. Projections indicate the underlying expectations will revert back to typical long-run levels only slowly.

Suggested Citation

  • Jens H. E. Christensen & Jose A. Lopez, 2016. "Differing views on long-term inflation expectations," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00089
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    References listed on IDEAS

    as
    1. Michael D. Bauer & Glenn D. Rudebusch, 2015. "Optimal policy and market-based expectations," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    2. Grace Xing Hu & Jun Pan & Jiang Wang, 2013. "Noise as Information for Illiquidity," Journal of Finance, American Finance Association, vol. 68(6), pages 2341-2382, December.
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    Cited by:

    1. Cristina Conflitti & Riccardo Cristadoro, 2018. "Oil prices and inflation expectations," Questioni di Economia e Finanza (Occasional Papers) 423, Bank of Italy, Economic Research and International Relations Area.

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