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Modeling the Dynamics of Inflation Compensation

Author

Listed:
  • Markus Jochmann

    (University of Strathclyde)

  • Gary Koop

    (University of Strathclyde, The Rimini Center for Economic Analysis)

  • Simon M. Potter

    (Federal Reserve Bank of New York)

Abstract

This paper investigates the relationship between short-term and long-term inflation expectations using daily data on inflation compensation. We use a flexible econometric model which allows us to uncover this relationship in a data-based manner. We relate our findings to the issue of whether inflation expectations are anchored, unmoored or contained. Our empirical results indicate no support for either unmoored or firmly anchored inflation expectations. Most evidence indicates that inflation expectations are contained.

Suggested Citation

  • Markus Jochmann & Gary Koop & Simon M. Potter, 2009. "Modeling the Dynamics of Inflation Compensation," Working Paper series 15_09, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:15_09
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    References listed on IDEAS

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    1. Refet S. Gürkaynak & Andrew T. Levin & Eric T. Swanson, 2006. "Does inflation targeting anchor long-run inflation expectations? evidence from long-term bond yields in the U.S., U.K., and Sweden," Working Paper Series 2006-09, Federal Reserve Bank of San Francisco.
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    6. Campbell, John & Shiller, Robert, 1988. "Stock Prices, Earnings, and Expected Dividends," Scholarly Articles 3224293, Harvard University Department of Economics.
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