What Is Keeping U S Core Inflation Low
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What Is Keeping U S Core Inflation Low
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Author : Mr.Yasser Abdih
language : en
Publisher: International Monetary Fund
Release Date : 2016-07-05
What Is Keeping U S Core Inflation Low written by Mr.Yasser Abdih and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-07-05 with Business & Economics categories.
Over the past two decades, U.S. core PCE goods and services inflation have evolved differently. Against the backdrop of global concerns of low inflation, we use this trend as motivation to develop a bottom-up model of U.S. inflation. We find that domestic forces play a larger role relative to foreign factors in influencing core services inflation, while foreign factors predominantly drive core goods price changes. When comparing forecasting performance, we find that both the aggregate Phillips curve and the bottom up approach give low root mean square errors. The latter, however, is more informative in tracing the effects of shocks and understanding the exact channels through which they affect aggregate inflation. Using scenario analysis—and given a relatively low sensitivity of core inflation to changes in slack, both at the aggregate Phillips curve and sub-components levels—we find that global pressures will likely keep core PCE inflation below 2 percent for the foreseeable future unless the dollar starts to depreciate markedly and the unemployment rate goes well below the natural rate. These results support the accommodative stance of monetary policy pursued thus far and, going forward, underscore the need for proceeding cautiously and very gradually in raising the federal funds rate.
What Is Keeping U S Core Inflation Low
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Author : Yasser Abdih
language : en
Publisher:
Release Date : 2016
What Is Keeping U S Core Inflation Low written by Yasser Abdih and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Over the past two decades, U.S. core PCE goods and services inflation have evolved differently. Against the backdrop of global concerns of low inflation, we use this trend as motivation to develop a bottom-up model of U.S. inflation. We find that domestic forces play a larger role relative to foreign factors in influencing core services inflation, while foreign factors predominantly drive core goods price changes. When comparing forecasting performance, we find that both the aggregate Phillips curve and the bottom up approach give low root mean square errors. The latter, however, is more informative in tracing the effects of shocks and understanding the exact channels through which they affect aggregate inflation. Using scenario analysis - and given a relatively low sensitivity of core inflation to changes in slack, both at the aggregate Phillips curve and sub-components levels - we find that global pressures will likely keep core PCE inflation below 2 percent for the foreseeable future unless the dollar starts to depreciate markedly and the unemployment rate goes well below the natural rate. These results support the accommodative stance of monetary policy pursued thus far and, going forward, underscore the need for proceeding cautiously and very gradually in raising the federal funds rate.
Measuring U S Core Inflation The Stress Test Of Covid 19
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Author : Laurence M. Ball
language : en
Publisher: International Monetary Fund
Release Date : 2021-12-17
Measuring U S Core Inflation The Stress Test Of Covid 19 written by Laurence M. Ball and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-12-17 with Business & Economics categories.
Large price changes in industries affected by the COVID-19 pandemic have caused erratic fluctuations in the U.S. headline inflation rate. This paper compares alternative approaches to filtering out the transitory effects of these industry price changes and measuring the underlying or core level of inflation over 2020-2021. The Federal Reserve’s preferred measure of core, the inflation rate excluding food and energy prices (XFE), has performed poorly: over most of 2020-21, it is almost as volatile as headline inflation. Measures of core that exclude a fixed set of additional industries, such as the Atlanta Fed’s sticky-price inflation rate, have been less volatile, but the least volatile have been measures that filter out large price changes in any industry, such as the Cleveland Fed’s median inflation rate and the Dallas Fed’s trimmed mean inflation rate. These core measures have followed smooth paths, drifting down when the economy was weak in 2020 and then rising as the economy has rebounded. Overall, we find that the case for the Federal Reserve to move away from the traditional XFE measure of core has strengthened during 2020-21.
The Great Inflation
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Author : Michael D. Bordo
language : en
Publisher: University of Chicago Press
Release Date : 2013-06-28
The Great Inflation written by Michael D. Bordo and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-06-28 with Business & Economics categories.
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
Inflation Expectations
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Author : Peter J. N. Sinclair
language : en
Publisher: Routledge
Release Date : 2009-12-16
Inflation Expectations written by Peter J. N. Sinclair and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-12-16 with Business & Economics categories.
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Inflation In Emerging And Developing Economies
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Author : Jongrim Ha
language : en
Publisher: World Bank Publications
Release Date : 2019-02-24
Inflation In Emerging And Developing Economies written by Jongrim Ha and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-02-24 with Business & Economics categories.
This is the first comprehensive study in the context of EMDEs that covers, in one consistent framework, the evolution and global and domestic drivers of inflation, the role of expectations, exchange rate pass-through and policy implications. In addition, the report analyzes inflation and monetary policy related challenges in LICs. The report documents three major findings: In First, EMDE disinflation over the past four decades was to a significant degree a result of favorable external developments, pointing to the risk of rising EMDE inflation if global inflation were to increase. In particular, the decline in EMDE inflation has been supported by broad-based global disinflation amid rapid international trade and financial integration and the disruption caused by the global financial crisis. While domestic factors continue to be the main drivers of short-term movements in EMDE inflation, the role of global factors has risen by one-half between the 1970s and the 2000s. On average, global shocks, especially oil price swings and global demand shocks have accounted for more than one-quarter of domestic inflation variatio--and more in countries with stronger global linkages and greater reliance on commodity imports. In LICs, global food and energy price shocks accounted for another 12 percent of core inflation variatio--half more than in advanced economies and one-fifth more than in non-LIC EMDEs. Second, inflation expectations continue to be less well-anchored in EMDEs than in advanced economies, although a move to inflation targeting and better fiscal frameworks has helped strengthen monetary policy credibility. Lower monetary policy credibility and exchange rate flexibility have also been associated with higher pass-through of exchange rate shocks into domestic inflation in the event of global shocks, which have accounted for half of EMDE exchange rate variation. Third, in part because of poorly anchored inflation expectations, the transmission of global commodity price shocks to domestic LIC inflation (combined with unintended consequences of other government policies) can have material implications for poverty: the global food price spikes in 2010-11 tipped roughly 8 million people into poverty.
Inflation Crises And Long Run Growth
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Author : Michael Bruno
language : en
Publisher:
Release Date : 1995
Inflation Crises And Long Run Growth written by Michael Bruno and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Economic development categories.
Recent literature suggests that long-run averages of growth and inflation are only weakly correlated and such correlation is not robust to exclusion of extreme inflation observations; inclusion of time series panel data has improved matters, but an aggregate parametric approach remains inconclusive. We propose a nonparametric definition of high inflation crises as periods when inflation is above 40 percent annually. Excluding countries with high inflation crises, we find no evidence of any consistent relationship between growth and inflation at any frequency. However, we find that growth falls sharply during discrete high inflation crises, then recovers surprisingly strongly after inflation falls. The fall in growth during crisis and recovery of growth after crisis tend to average out to close to zero (even slightly above zero), hence the lack of a robust cross-section correlation. Our findings could be consistent either with trend stationarity of output, in which inflation crises are purely cyclical phenomena, or with models in which crises have a favorable long-run purgative effect. Our findings do not support the view that reduction of high inflation carries heavy short-to-medium run output costs.
A Bottom Up Reduced Form Phillips Curve For The Euro Area
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Author : Thomas McGregor
language : en
Publisher: International Monetary Fund
Release Date : 2022-12-16
A Bottom Up Reduced Form Phillips Curve For The Euro Area written by Thomas McGregor and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-12-16 with Business & Economics categories.
We develop a bottom-up model of inflation in the euro area based on a set of augmented Phillips curves for seven subcomponents of core inflation and auxiliary regressions for non-core items. We use the model’s disaggregated structure to explore which factors drove the deterioration in forecasting performance during the pandemic period and use these insights to improve on the ability to forecast inflation. In the baseline, the projection for core inflation is centered above 3 percent at end-2023, while headline inflation is expected to drop quite sharply over 2023, with energy base effects pulling inflation down from the currently very elevated levels to below 3 percent by 2023q4. The confidence intervals around these projections are wide given elevated uncertainty. We argue that the bottom-up approach offers a useful complement to the forecasters toolbox – even in the current uncertain environment - by improving forecast accuracy, shedding additional light on the drivers of inflation and providing a framework in which to apply ex post judgement in a structured way.
Understanding U S Wage Dynamics
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Author : Mr.Yasser Abdih
language : en
Publisher: International Monetary Fund
Release Date : 2018-06-15
Understanding U S Wage Dynamics written by Mr.Yasser Abdih and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-15 with Business & Economics categories.
In this paper, we undertake empirical analysis to understand U.S. wage behavior since the beginning of the new millennium. At the macroeconomic level, we find that a productivity-augmented Phillips curve model explains the data fairly well. The model reveals that the upward pressure on wage growth from recent tightening in the labor market has been dampened by a persistent decline in trend labor productivity growth and the share of income that accrues to labor. These themes are reinforced and complemented at the micro-economic level. Lower regional unemployment puts an upward pressure on wages of individuals, although this effect has become weaker since 2008. But there is downward pressure on wages for individuals with occupations that are exposed to automation and offshoring, and in industries with a higher concentration of large firms. All these factors appear to play a role illustrating why it is difficult to single out any one culprit for the observed wage growth moderation.
Imf Research Bulletin September 2016
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Author : International Monetary Fund. Research Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2016-09-30
Imf Research Bulletin September 2016 written by International Monetary Fund. Research Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-09-30 with Business & Economics categories.
The September 2016 issue of the IMF Research Bulletin includes the following two Research Summaries: “A New Look at Bank Capital” (by Jihad Dagher, Giovanni Dell’Ariccia, Luc Laeven, Lev Ratnovski, and Hui Tong) and “Does Growth Create Jobs?: Evidence for Advance and Developing Economies (by Zidong An, Nathalie Gonzalez Prieto, Prakash Loungani, and Saurabh Mishra). The Q&A article by Rabah Arezki discusses “Seven Questions on Rethinking the Oil Market in the Aftermath of the 2014-16 Price Slump.” A listing of recent IMF Working Papers, Staff Discussion Notes, and Recommended Readings from IMF Publications are also included. Readers can also find an announcement on the 2016 Annual Research Conference and links to top cited 2015 articles in the IMF Economic Review.