Published in:FRB of St. Louis Working Paper ; No. 2006-013B
Extent:
1 Online-Ressource (49 p)
Language:
English
DOI:
10.2139/ssrn.890659
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 2006 erstellt
Description:
We measure the relative contribution of the deviation of real activity from its equilibrium (the gap), quot;supply shockquot; variables, and long-horizon inflation expectations for explaining the U.S. inflation rate in the post-war period. For alternative specifications for the inflation driving process and measures of inflation and the gap we reach a similar conclusion: the contribution of changes in long-horizon inflation expectations dominates that for the gap and supply shock variables. Put another way, variation in long-horizon inflation expectations explains the bulk of the movement in realized inflation. We also use our preferred specification for the inflation driving process to compute a history of model-based forecasts of the inflation rate. For both short and long horizons these forecasts are close to those observed from surveys