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Tracking U.S. Inflation Expectations with Domestic and Global Indicators

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  • Efrem Castelnuovo

    () (University of Padua)

Abstract

Are foreign variables important for tracking U.S. inflation expectations? This paper estimates a reduced-form model which takes into account both domestic and global indicators of economic slack as well as inflationary pressures. Our main findings point towards the instability of the estimated parameters over the last four decades. In particular, global indicators appear to have played a significant role in shaping forecasters' expectations until the mid-'80s. By contrast, the U.S. monetary policy stance turns out to be relevant in the '80s and '90s. We relate this finding to the more aggressive monetary policy conduct implemented by the Fed since the end of the Volcker experiment.

Suggested Citation

  • Efrem Castelnuovo, 2006. "Tracking U.S. Inflation Expectations with Domestic and Global Indicators," "Marco Fanno" Working Papers 0031, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0031
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    Cited by:

    1. Castelnuovo, Efrem, 2013. "Monetary policy shocks and financial conditions: A Monte Carlo experiment," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 282-303.
    2. Pierdzioch, Christian & Reid, Monique B. & Gupta, Rangan, 2016. "Inflation forecasts and forecaster herding: Evidence from South African survey data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 42-50.

    More about this item

    Keywords

    inflation expectations; globalization; domestic factors; global factors; monetary policy switch;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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