Modeling the Dynamics of Inflation Compensation
This paper investigates the relationship between short-term and long-term ination expectations using daily data on ination compen- sation. We use a exible econometric model which allows us to uncover this relationship in a data-based manner. We relate our ndings to the issue of whether ination expectations are anchored, unmoored or contained. Our empirical results indicate no support for either unmoored or rmly anchored ination expectations. Most evidence indicates that ination expectations are contained.
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