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Measuring Inflation Anchoring and Uncertainty: A U.S. and Euro Area Comparison
Author(s) -
GRISHCHENKO OLESYA,
MOUABBI SARAH,
RENNE JEANPAUL
Publication year - 2019
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12622
Subject(s) - anchoring , inflation (cosmology) , economics , survey of professional forecasters , recession , econometrics , sample (material) , monetary policy , monetary economics , macroeconomics , keynesian economics , psychology , physics , social psychology , theoretical physics , thermodynamics
We use several U.S. and euro‐area surveys of professional forecasters to estimate a dynamic factor model of inflation featuring time‐varying uncertainty. We obtain survey‐consistent distributions of future inflation at any horizon, both in the U.S. and the euro area. Equipped with this model, we propose a novel measure of the anchoring of inflation expectations that accounts for inflation uncertainty. Our results suggest that following the Great Recession, inflation anchoring improved in the United States, while mild de‐anchoring occurred in the euro area. As of our sample end, both areas appear to be almost equally anchored.