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Inflation trends in Asia: implications for central banks
[Are Phillips curves useful for forecasting inflation?]

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  • Juan Angel Garcia
  • Aubrey Poon

Abstract

This article shows that trend inflation estimation offers crucial insights for the analysis of inflation dynamics and long-term inflation expectations. Focusing on the 12 largest Asian economies, a sample comprising both advanced and emerging economies and different monetary policy regimes, we show that trend inflation analysis can help explain the different impact of the disinflationary shocks across countries. Among countries with inflation below target in recent years, in those with trend inflation low but constant (Australia, New Zealand) low inflation may be lasting, but temporary, while those in which trend inflation has declined (South Korea, Thailand) risk low inflation to become entrenched and a de-anchoring of expectations. Countries like India, Philippines, and Indonesia instead experienced a moderation in inflation and lower trend inflation, while others (China, Taiwan, Hong Kong SAR, Malaysia) were impacted very mildly. That diverse international evidence offers important insights for central banks worldwide.

Suggested Citation

  • Juan Angel Garcia & Aubrey Poon, 2022. "Inflation trends in Asia: implications for central banks [Are Phillips curves useful for forecasting inflation?]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 671-700.
  • Handle: RePEc:oup:oxecpp:v:74:y:2022:i:3:p:671-700.
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    File URL: http://hdl.handle.net/10.1093/oep/gpab050
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    Cited by:

    1. Pär Österholm & Aubrey Poon, 2023. "Trend Inflation in Sweden," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4707-4716, October.
    2. Guglielmo Maria Caporale & Luis Alberiko Gil-Alana & Carlos Poza, 2022. "Inflation in the G7 countries: persistence and structural breaks," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(3), pages 493-506, July.
    3. Beechey, Meredith & Österholm, Pär & Poon, Aubrey, 2023. "Estimating the US trend short-term interest rate," Finance Research Letters, Elsevier, vol. 55(PA).

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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • 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
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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