Template-Type: ReDIF-Paper 1.0
Author-Name: Deborah  Gefang
Author-Name-First: Deborah 
Author-Name-Last: Gefang
Author-Email: d.gefang@lancaster.ac.uk
Author-Workplace-Name: Department of Economics, University of Lancaster
Author-Name: Gary Koop
Author-Name-First: Gary
Author-Name-Last: Koop
Author-Email: gary.koop@strath.ac.uk
Author-Workplace-Name: Department of Economics, University of Strathclyde
Author-Name: Simon  Potter
Author-Name-First: Simon 
Author-Name-Last: Potter
Author-Email: simon.potter@ny.frb.org
Author-Workplace-Name: Research and Statistics Group, Federal Reserve Bank of New York
Title: The Dynamics of UK and US Inflation Expectations*
Abstract: This paper investigates the relationship between short term and long term inflation expectations in the US and the UK with a focus on inflation pass through (i.e. how changes in short term expectations affect long term expectations). An econometric methodology is used which allows us to uncover the relationship between inflation pass through and various explanatory variables. We relate our empirical results to theoretical models of anchored, contained and unmoored inflation expectations. For neither country do we find anchored or unmoored inflation expectations. For the US, contained inflation expectations are found. For the UK, our findings are not consistent with the specific model of contained inflation expectations presented here, but are consistent with a more broad view of expectations being constrained by the existence of an inflation target.
Length: 35 pages
Creation-Date: 2011-04
Revision-Date: 
Publication-Status: 
File-URL: http://www.strath.ac.uk/media/1newwebsite/departmentsubject/economics/research/researchdiscussionpapers/2011/11-20_Final.pdf
File-Format: Application/pdf
Number: 1120
Classification-JEL: C11, C24, E37
Keywords: smoothly mixing regression, inflation pass through, Bayesian
Handle: RePEc:str:wpaper:1120