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Inflation-Related Working Papers

Inflation-Related Working Papers

Working papers are preliminary versions of technical papers containing the results and discussions of current research.

  • WP 20-22R | Late Payment Fees and Nonpayment in Rental Markets, and Implications for Inflation Measurement: Theoretical Considerations and Evidence


    Wesley Janson Randal J Verbrugge

    Original Paper: WP 20-22

    Abstract

    Statistical agencies track rental expenditures for use in the national accounts and in consumer price indexes (CPIs). As such, statistical agencies should include late payment fees and nonpayment in rent. In the US context, late payment fees are excluded from the CPI. Ostensibly, nonpayment of rent is included in the US CPI; but its treatment is deficient, and we demonstrate that small variations in nonpayment could lead to large swings in shelter inflation, and might have played a role in the 2009 measured shelter inflation collapse. They didn’t: while the national nonpayment incidence is 2-3 percent, in the 1 million plus rent observations in BLS rent microdata from 2000-2016, no nonpayment is recorded. A back-of-the-envelope calculation suggests that, assuming nonpayment undermeasurement continued after 2016, CPI shelter inflation may have been overestimated by about 1 percentage point per month (annualized) in 2020. Late fees and nonpayment are difficult to measure in real time. We offer implementation suggestions that are consistent with CPI procedures.  Read More

  • WP 21-06 | All Forecasters Are Not the Same: Time-Varying Predictive Ability across Forecast Environments


    Robert W Rich Joseph Tracy

    Abstract

    This paper examines data from the European Central Bank’s Survey of Professional Forecasters to investigate whether participants display equal predictive performance. We use panel data models to evaluate point- and density-based forecasts of real GDP growth, inflation, and unemployment. The results document systematic differences in participants’ forecast accuracy that are not time invariant, but instead vary with the difficulty of the forecasting environment. Specifically, we find that some participants display higher relative accuracy in tranquil environments, while others display higher relative accuracy in volatile environments. We also find that predictive performance is positively correlated across target variables and horizons, with density forecasts generating stronger correlation patterns. Taken together, the results support the development of expectations models featuring persistent heterogeneity.  Read More

  • WP 21-03 | Location, Location, Structure Type: Rent Divergence within Neighborhoods


    Brian Adams Randal J Verbrugge

    Abstract

    Housing rents are a large share of household budgets and make a large contribution to overall inflation. Rent inflation rates for different types of housing units sometimes diverge, even in the same neighborhoods. We estimate during 2013 to 2016 apartment rents outpaced rents for detached housing in the United States by 0.76 percentage points annually after controlling for location effects. These rent dynamics imply a segmented housing market. They also suggest rent indexes need to be based on data structurally representative of their measurement objective. In particular, indexes based on professionally managed apartment complexes mismeasure the rents for housing generally. Even indexes based on careful geographical sampling, such as the Consumer Price Index’s Owners’ Equivalent Rent component, may be biased by using an unrepresentative mix of apartments and houses.  Read More

  • WP 20-35 | Macroeconomic Changes with Declining Trend Inflation: Complementarity with the Superstar Firm Hypothesis


    Takushi Kurozumi Willem Van Zandweghe

    Abstract

    Recent studies indicate that, since 1980, the average markup and the profit share of income have increased, while the labor share and the investment share of spending have decreased. We examine the role of monetary policy in these changes as inflation has concurrently trended down. In a simple staggered price model with a non-CES aggregator of differentiated goods, a decline in trend inflation as measured since 1980 can account for a substantial portion of the changes. Moreover, introducing a rise in the productivity of “superstar firms” in the model can better explain not only the macroeconomic changes but also the micro evidence on the distribution of firms’ markups, including the flat median markup.  Read More

  • WP 20-33 | Even Keel and the Great Inflation


    Victoria Consolvo Owen F Humpage Sanchita Mukherjee

    Abstract

    During the early part of the Great Inflation (1965-1975), the Federal Reserve undertook even-keel operations to assist the US Treasury’s coupon security sales. Accordingly, the central bank delayed any tightening of monetary policy and permanently injected reserves into the banking system. Using real-time Taylor-type and McCallum-like reaction functions, we show that the Fed routinely undertook these operations only when it was otherwise tightening monetary policy. Using a quantity-equation framework, we show that the Federal Reserve’s even-keel actions added approximately one percentage point to the overall 5.1 percent average annual inflation rate over these years.  Read More

  • WP 20-31 | Real-Time Density Nowcasts of US Inflation: A Model-Combination Approach


    Edward Knotek II Saeed Zaman

    Abstract

    We develop a flexible modeling framework to produce density nowcasts for US inflation at a trading-day frequency. Our framework: (1) combines individual density nowcasts from three classes of parsimonious mixed-frequency models; (2) adopts a novel flexible treatment in the use of the aggregation function; and (3) permits dynamic model averaging via the use of weights that are updated based on learning from past performance. Together these features provide density nowcasts that can accommodate non-Gaussian properties. We document the competitive properties of the nowcasts generated from our framework using high-frequency real-time data over the period 2000-2015.  Read More

  • WP 20-26 | Average Inflation Targeting and Household Expectations


    Olivier Coibion Yuriy Gorodnichenko Edward Knotek II Raphael Schoenle

    Abstract

    Using a daily survey of U.S. households, we study how the Federal Reserve’s announcement of its new strategy of average inflation targeting affected households’ expectations. Starting with the day of the announcement, there is a very small uptick in the minority of households reporting that they had heard news about monetary policy relative to prior to the announcement, but this effect fades within a few days. Those hearing news about the announcement do not seem to have understood the announcement: they are no more likely to correctly identify the Fed’s new strategy than others, nor are their expectations different. When we provide randomly selected households with pertinent information about average inflation targeting, their expectations still do not change in a different way than when households are provided with information about traditional inflation targeting.  Read More

  • WP 20-20 | Output-Inflation Trade-offs and the Optimal Inflation Rate


    Takushi Kurozumi Willem Van Zandweghe

    Abstract

    In staggered price models, a non-CES aggregator of differentiated goods generates empirically plausible short- and long-run trade-offs between output and inflation: lower trend inflation flattens the Phillips curve and decreases steady-state output by increasing markups. We show that the aggregator reduces both the steady-state welfare cost of higher trend inflation and the inflation-related weight in a model-based welfare function for higher trend inflation. Consequently, optimal trend inflation is moderately positive even without considering the zero lower bound on nominal interest rates. Moreover, the welfare difference between 2 percent and 4 percent inflation targets is much smaller than in the CES aggregator case.  Read More

  • WP 20-16 | Raising the Inflation Target: How Much Extra Room Does It Really Give?


    Raphael Schoenle Jean-Paul LHuillier

    Abstract

    Some, but less than intended. The reason is a shift in the behavior of the private sector: Prices adjust more frequently, lowering the potency of monetary policy. We quantitatively investigate this channel across different models, based on a calibration using micro data. By raising the target from 2 percent to 4 percent, the monetary authority gets only between 0.51 and 1.60 percentage points of effective extra policy room for monetary policy (not 2 percentage points as intended). Getting 2 percentage points of effective extra room requires raising the target to more than 4 percent. Taking this channel into consideration raises the optimal inflation target by roughly 1 percentage points relative to earlier computations.  Read More

  • WP 20-17 | Asymmetric Responses of Consumer Spending to Energy Prices: A Threshold VAR Approach


    Edward Knotek II Saeed Zaman

    Abstract

    We document asymmetric responses of consumer spending to energy price shocks: Using a multiple-regime threshold vector autoregressive model estimated with Bayesian methods on US data, we find that positive energy price shocks have a larger negative effect on consumption compared with the increase in consumption in response to negative energy price shocks. For large shocks, the cumulative consumption responses are three to five times larger for positive than for negative shocks. Digging into disaggregated spending, we find that the estimated asymmetric responses are strongest for durable goods, but asymmetries are also present in the responses of nondurables and services.  Read More

  • WP 20-12 | News and Uncertainty about COVID-19: Survey Evidence and Short-Run Economic Impact


    Alexander M Dietrich Keith Kuester Gernot J Muller Raphael Schoenle

    Abstract

    We survey households about their expectations of the economic fallout of the COVID-19 pandemic, in real time and at daily frequency. Our baseline question asks about the expected impact on output and inflation over a one-year horizon. Starting on March 10, the median response suggests that the expected output loss is still moderate. This changes over the course of three weeks: At the end of March, the expected loss amounts to some 15 percent. Meanwhile, the pandemic is expected to raise inflation considerably. The uncertainty about these effects is very large. In the second part of the paper we feed the survey data into a New Keynesian business cycle model. Because the economic costs of the pandemic have not fully materialized yet but are nonetheless (a) anticipated and (b) uncertain, private expenditure collapses, thereby amplifying and bringing forward in time the economic costs of the pandemic. The short-run economic impact of the pandemic depends critically on whether monetary policy accommodates the drop in the natural rate of interest or not.  Read More

  • WP 19-09R | Finding a Stable Phillips Curve Relationship: A Persistence-Dependent Regression Model


    Richard Ashley Randal J Verbrugge

    Original Paper: WP 19-09

    Abstract

    We establish that the Phillips curve is persistence-dependent: inflation responds differently to persistent versus moderately persistent (or versus transient) fluctuations in the unemployment gap. Previous work fails to model this dependence, so it finds numerous “inflation puzzles”—such as missing inflation/disinflation—noted in the literature. Our model specification eliminates these puzzles; for example, the Phillips curve has not weakened, and inflation is not “stubbornly low” at present. The model’s coefficients are stable, and it provides accurate conditional recursive forec asts through the Great Recession. The persistence-dependent relationship we uncover is interpretable as being business-cycle-phase-dependent and is thus consistent with existing theory.  Read More

  • WP 16-02R | Downward Nominal Wage Rigidity in the United States during and after the Great Recession


    Bruce Fallick Daniel Villar William Wascher

    Original Paper: WP 16-02

    Abstract

    Rigidity in wages has long been thought to impede the functioning of labor markets. In this paper, we investigate the extent of downward nominal wage rigidity in US labor markets using job-level data from a nationally representative establishment-based compensation survey collected by the Bureau of Labor Statistics. We use several distinct methods to test for downward nominal wage rigidity and to assess whether such rigidity is less or more severe in the presence of negative economic shocks than in more normal economic times. We find a significant amount of downward nominal wage rigidity in the United States and no evidence that the high degree of labor market distress during the Great Recession reduced downward nominal wage rigidity. We further find a lower degree of nominal rigidity at multi-year horizons.  Read More

  • WP 19-25 | The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy


    Ernesto Pasten Raphael Schoenle Michael Weber

    Revisions: WP 19-25R

    Abstract

    Realistic heterogeneity in price rigidity interacts with heterogeneity in sectoral size and input-output linkages in the transmission of monetary policy shocks. Quantitatively, heterogeneity in price stickiness is the central driver for real effects. Input-output linkages and consumption shares alter the identity of the most important sectors to the transmission. Reducing the number of sectors decreases monetary non-neutrality with a similar impact response of inflation. Hence, the initial response of inflation to monetary shocks is not sufficient to discriminate across models and ignoring heterogeneous consumption shares and input-output linkages identifies the wrong sectors from which the real effects originate.  Read More

  • WP 19-24 | The Effects of Price Endings on Price Rigidity: Evidence from VAT Changes


    Edward Knotek II Doron Sayag Avichai Snir

    Abstract

    We document a causal role for price endings in generating micro and macro price rigidity. Based on micro price data underlying the consumer price index in Israel, we document that most stores have a favored price ending—a final digit, usually a zero or nine, used by a majority of prices in that store—and that these favored price endings are utilized extensively. Using changes to the VAT rate as exogenous cost shocks that affect prices regardless of ending, we find that the frequency of price adjustment for nonfavored endings increases by twice as much as the frequency of adjustment for favored endings in months when the VAT rate changes. In the aggregate, sluggish pass-through of VAT rate changes is due to favored endings; changes in the VAT rate are passed through fully and immediately to nonfavored endings.  Read More

  • WP 19-23 | The Roles of Price Points and Menu Costs in Price Rigidity


    Edward Knotek II

    Abstract

    Macroeconomic models often generate nominal price rigidity via menu costs. This paper provides empirical evidence that treating menu costs as a structural explanation for sticky prices may be spurious. Using scanner data, I note two empirical facts: (1) price points, embodied in nine-ending prices, account for approximately two-thirds of prices; and (2) at the conclusion of sales, post-sale prices return to their pre-sale levels more than three-fourths of the time. I construct a model that nests roles for menu costs and price points and estimate model variants. Excluding the two facts yields a statistically and economically significant role for menu costs in generating price rigidity. Incorporating the two facts yields an incentive to set nine-ending prices two orders of magnitude larger than the menu costs. In this setting, the price point model can match the two stylized facts, but menu costs are effectively irrelevant as a source of price rigidity. The choice of a mechanism for price rigidity matters for aggregate dynamics.  Read More

  • WP 19-16 | A Theory of Intrinsic Inflation Persistence


    Takushi Kurozumi Willem Van Zandweghe

    Abstract

    We propose a novel theory of intrinsic inflation persistence by introducing trend inflation and variable elasticity of demand in a model with staggered price and wage setting. Under nonzero trend inflation, the variable elasticity generates intrinsic persistence in inflation through a measure of price dispersion stemming from staggered price setting. It also introduces intrinsic persistence in wage inflation under staggered wage setting, which affects price inflation. With the theory we show that inflation exhibits a persistent, hump-shaped response to a monetary policy shock. We also show that a credible disinflation leads to a gradual decline in inflation and a fall in output, and lower trend inflation reduces inflation persistence, as observed around the time of the Volcker disinflation.  Read More

  • WP 19-15 | Thinking Outside the Box: Do SPF Respondents Have Anchored Inflation Expectations?


    Carola Conces Binder Wesley Janson Randal J Verbrugge

    Abstract

    Despite the stability of the median 10-year inflation expectations in the Survey of Professional Forecasters (SPF) near 2 percent, we show that not a single SPF respondent’s expectations have been anchored at the target since the Federal Open Market Committee’s (FOMC) enactment of an inflation target in January 2012, or even since 2015. However, we find significant evidence for “delayed anchoring,” or a move toward being anchored, particularly after the federal funds rate lifted off in December 2015.  Read More

  • WP 18-14R | A New Look at Historical Monetary Policy and the Great Inflation through the Lens of a Persistence-Dependent Policy Rule


    Richard Ashley Kwok Ping Tsang Randal J Verbrugge

    Original Paper: WP 18-14

    Abstract

    The origins of the Great Inflation, a central 20th century U.S. macroeconomic event, remain contested. Prominent explanations are poor forecasts or deficient activity gap estimates. An alternative view: the FOMC was unwilling to fight inflation, perhaps due to political pressures. Our findings, based on a novel approach, support the latter view. New econometric tools allow us to credibly identify the particular activity gap, if any, in use. Persistence-dependent unemployment (gap) responses in the 1970s were essentially the same pre- and post-Volcker. Conversely, FOMC behavior vis-à-vis inflation—also persistence-dependent—changed markedly starting with Volcker, consistent with (though not proving) the political pressures view.  Read More

  • WP 19-09 | Variation in the Phillips Curve Relation across Three Phases of the Business Cycle


    Richard Ashley Randal J Verbrugge

    Revisions: WP 19-09R

    Abstract

    We use recently developed econometric tools to demonstrate that the Phillips curve unemployment rate–inflation rate relationship varies in an economically meaningful way across three phases of the business cycle. The first (“bust phase”) relationship is the one highlighted by Stock and Watson (2010): A sharp reduction in inflation occurs as the unemployment rate is rising rapidly. The second (“recovery phase”) relationship occurs as the unemployment rate subsequently begins to fall; during this phase, inflation is unrelated to any conventional unemployment gap. The final (“overheating phase”) relationship begins once the unemployment rate drops below its natural rate. We validate our findings in a forecasting exercise and find statistically significant episodic forecast improvement. Our analysis allows us to provide a unified explanation of many prominent findings in the literature.  Read More

  • WP 18-14 | All Fluctuations Are Not Created Equal: The Differential Roles of Transitory versus Persistent Changes in Driving Historical Monetary Policy


    Richard Ashley Kwok Ping Tsang Randal J Verbrugge

    Revisions: WP 18-14R

    Abstract

    The historical analysis of FOMC behavior using estimated simple policy rules requires the specification of either an estimated natural rate of unemployment or an output gap. But in the 1970s, neither output gap nor natural rate estimates appear to guide FOMC deliberations. This paper uses the data to identify the particular implicit unemployment rate gap (if any) that is consistent with FOMC behavior. While its ability appears to have improved over time, our results indicate that, both before the Volcker period and through the Bernanke period, the FOMC distinguished persistent movements in the unemployment rate from other movements; implicitly such movements were treated as an intermediate target, one that departs substantially from conventional estimates of the natural rate. We further investigate historical FOMC responses to inflation fluctuations. In this regard, FOMC behavior changed in the Volcker-Greenspan-Bernanke period: its response to the inflation rate became much stronger, and it focused more intensely on very persistent movements in this variable. Our results shed light on the “Great Inflation” experience of the 1970s, and are consistent with the view that political pressures effectively limited the FOMC response to the buildup of inflation. They also suggest new directions for DSGE modeling.  Read More

  • WP 18-12 | Inflation, Debt, and Default


    Sewon Hur Illenin O Kondo Fabrizio Perri

    Abstract

    We study how the co-movement of inflation and economic activity affects real interest rates and the likelihood of debt crises. First, we show that for advanced economies, periods with procyclical inflation are associated with lower real interest rates. Procyclical inflation implies that nominal bonds pay out more in bad times, making them a good hedge against aggregate risk. However, such procyclicality also increases sovereign default risk when the economy deteriorates, since the government needs to make larger (real) payments. In order to evaluate both effects, we develop a model of sovereign default on domestic nominal debt with exogenous inflation risk and domestic risk-averse lenders. Countercyclical inflation is a substitute with default, while procyclical inflation is a complement with it, by increasing default incentives. In good times, when default is unlikely, procyclical inflation yields lower real rates. In bad times, as default becomes more material, procyclical inflation can magnify default risk and trigger an increase in real rates.  Read More

  • WP 18-13 | A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area


    Robert W Rich Joseph Tracy

    Abstract

    This paper examines point and density forecasts of real GDP growth, inflation and unemployment from the European Central Bank’s Survey of Professional Forecasters. We present individual uncertainty measures and introduce individual point- and density-based measures of disagreement. The data indicate substantial heterogeneity and persistence in respondents’ uncertainty and disagreement, with uncertainty associated with prominent respondent effects and disagreement associated with prominent time effects. We also examine the co-movement between uncertainty and disagreement and find an economically insignificant relationship that is robust to changes in the volatility of the forecasting environment. This provides further evidence that disagreement is not a reliable proxy for uncertainty.  Read More

  • WP 18-09 | Combining Survey Long-Run Forecasts and Nowcasts with BVAR Forecasts Using Relative Entropy


    Ellis W Tallman Saeed Zaman

    Abstract

    This paper constructs hybrid forecasts that combine both short- and long-term conditioning information from external surveys with forecasts from a standard fixed-coefficient vector autoregression (VAR) model. The forecast accuracy gains for inflation are substantial, statistically significant, and are competitive with the forecast accuracy from both time-varying VARs and univariate benchmarks. We view our proposal as an indirect approach to accommodating structural change and moving end points.  Read More

  • WP 17-05 | A Theory of Sticky Rents: Search and Bargaining with Incomplete Information


    Randal J Verbrugge Joshua Gallin

    Abstract

    Tenants' rents are remarkably sticky even though regular recontracting would suggest substantial rent flexibility. In addition, rent stickiness varies significantly across structures such as detached units and large apartment. We offer the first theoretical explanation of rent stickiness that is consistent with these two facts. In this theory, search and bargaining with incomplete information generates stickiness in the absence of menu costs or other commonly used modeling assumptions.  Read More

  • WP 13-03R | The Usefulness of the Median CPI in Bayesian VARs Used for Macroeconomic Forecasting and Policy


    Brent Meyer Saeed Zaman

    Original Paper: WP 13-03

    Abstract

    We investigate the forecasting performance of the median CPI in a variety of BVARs that are often used for monetary policy. We find that including the median CPI improves the forecasts of both core and headline CPI and PCE across our set of monthly and quarterly BVARs, as well as the federal funds rate.  Read More

  • WP 15-19R | Forecasting Inflation: Phillips Curve Effects on Services Price Measures


    Ellis W Tallman Saeed Zaman

    Original Paper: WP 15-19

    Abstract

    We estimate an empirical model of inflation that exploits a Phillips curve relationship between a measure of unemployment and a subaggregate measure of inflation (services). Our results indicate marked improvements in point and density forecasting accuracy statistics for models that exploit relationships between services inflation and the unemployment rate.  Read More

  • WP 14-03R | Nowcasting U.S. Headline and Core Inflation


    Edward Knotek II Saeed Zaman

    Original Paper: WP 14-03

    Abstract

    We propose a new and parsimonious model for nowcasting headline and core inflation in the U.S. consumer price index (CPI) and price index for personal consumption expenditures (PCE) that relies on relatively few variables.  Read More

  • WP 15-27 | Tracking Trend Inflation: Nonseasonally Adjusted Variants of the Median and Trimmed-Mean CPI


    Amy Higgins Randal J Verbrugge

    Abstract

    We make five contributions. We demonstrate that extant trimmed-mean and median CPI construction procedures depart from Bureau of Labor ...  Read More

  • WP 15-20 | A New Model of Inflation, Trend Inflation, and Long-Run Inflation Expectations


    Joshua CC Chan Todd E Clark Gary Koop

    Abstract

    This paper adds to the growing literature which uses survey-based long-run forecasts of inflation to estimate trend inflation.  Read More

  • WP 15-19 | Forecasting Inflation: Phillips Curve Effects on Services Price Measures


    Ellis W Tallman Saeed Zaman

    Revisions: WP 15-19R

    Abstract

    We estimate an empirical model of inflation that exploits a Phillips curve relationship between a measure of unemployment and a subaggregate measure of inflation (services).  Read More

  • WP 14-11R | Have Standard VARs Remained Stable since the Crisis?


    Knut Are Aastveit Andrea Carriero Todd E Clark Massimiliano Marcellino

    Original Paper: WP 14-11

    Abstract

    Small or medium-scale VARs are commonly used in applied macroeconomics for forecasting and evaluating the shock transmission mechanism. We conduct a similar analysis but focus on the effects of the recent crisis.  Read More

  • WP 14-26 | Drifting Inflation Targets and Monetary Stagflation


    Shujaat Khan Edward Knotek II

    Abstract

    This paper revisits the phenomenon of stagflation.  Read More

  • WP 14-03 | Nowcasting U.S. Headline and Core Inflation


    Edward Knotek II Saeed Zaman

    Revisions: WP 14-03R

    Abstract

    We propose a new and parsimonious model for nowcasting headline and core inflation in the U.S. price index for personal consumption expenditures (PCE) and the consumer price index (CPI).  Read More

  • WP 12-17R | Trimmed-Mean Inflation Statistics: Just Hit the One in the Middle


    Brent Meyer Guhan Venkatu

    Original Paper: WP 12-17

    Abstract

    This paper reinvestigates the performance of trimmed-mean inflation measures some 20 years since their inception, asking whether there is a particular trimmed-mean measure that dominates the median CPI.  Read More

  • WP 13-03 | It’s Not Just for Inflation: The Usefulness of the Median CPI in BVAR Forecasting


    Brent Meyer Saeed Zaman

    Revisions: WP 13-03R

    Abstract

    In this paper we investigate the forecasting performance of the median CPI in a variety of Bayesian VARs (BVARs) that are often used for monetary policy.  Read More

  • WP 12-34 | Inflation and Output in New Keynesian Models with a Transient Interest Rate Peg


    Charles T Carlstrom Timothy S Fuerst Matthias Paustian

    Abstract

    Recent monetary policy experience suggests a simple diagnostic for models of monetary non-neutrality. We pursue this simple diagnostic in several variants of the familiar Dynamic New Keynesian (DNK) model.  Read More

  • WP 12-17 | Trimmed-Mean Inflation Statistics: Just Hit the One in the Middle


    Brent Meyer Guhan Venkatu

    Revisions: WP 12-17R

    Abstract

    This paper reinvestigates the performance of trimmed-mean inflation measures some 20 years since their inception, asking whether there is a particular trimmed-mean measure that dominates the median CPI.  Read More

  • WP 12-02 | How Inflationary Is an Extended Period of Low Interest Rates?


    Charles T Carlstrom Timothy S Fuerst Matthias Paustian

    Abstract

    A monetary model should be rejected if a reasonably short nominal rate peg results in an unreasonably large inflation response. We pursue this simple test in three variants of the familiar dynamic new Keynesian (DNK) model. All fail.  Read More

  • WP 11-34 | A Bayesian Evaluation of Alternative Models of Trend Inflation


    Todd E Clark Taeyoung Doh

    Abstract

    This paper uses Bayesian methods to assess alternative models of trend inflation.  Read More

  • WP 11-33 | The Term Structure of Inflation Compensation in the Nominal Yield Curve


    Mehmet Pasaogullari Simeon Tsonev

    Abstract

    We propose a DSGE model with regime switching in the central bank’s inflation target to explain inflation compensation in the UK.  Read More

  • WP 11-07 | Inflation Expectations, Real Rates, and Risk Premia: Evidence from Inflation Swaps


    Joseph G Haubrich George Pennacchi Peter Ritchken

    Abstract

    This paper develops a model of the term structures of nominal and real interest rates driven by state variables representing the short-term real interest rate, expected inflation, inflation's central tendency, and four volatility factors.  Read More

  • WP 11-03 | The Cost of Inflation: A Mechanism Design Approach


    Guillaume Rocheteau

    Abstract

    I apply mechanism design to quantify the cost of inflation that can be attributed to monetary frictions alone.  Read More

  • WP 07-21 | Inflation Persistence, Inflation Targeting, and the Great Moderation


    Charles T Carlstrom Timothy S Fuerst

    Abstract

    There is growing evidence that the empirical Phillips curve within the US has changed significantly since the early 1980's.  Read More

  • WP 07-10 | Inflation-Output Gap Trade-off with a Dominant Oil Supplier


    Anton Nakov Andrea Pescatori

    Abstract

    An exogenous oil price shock raises inflation and contracts output, similar to a negative productivity shock.  Read More

  • WP 07-09 | Incomplete Markets and Households’ Exposure to Interest Rate and Inflation Risk: Implications for the Monetary Policy Maker


    Andrea Pescatori

    Abstract

    The present paper studies optimal monetary policy when the representative agent assumption is abandoned and financial wealth heterogeneity across households is introduced.  Read More

  • WP 05-04 | State-Dependent Pricing, Inflation, and Welfare in Search Economies


    Ben R Craig Guillaume Rocheteau

    Abstract

    This paper investigates the welfare effects of inflation in economies with search frictions and menu costs.  Read More

  • WP 05-02 | Testing Near-Rationality Using Detailed Survey Data


    Michael F Bryan Stefan Palmqvist

    Abstract

    This paper considers the evidence of "near-rationality," as described by Akerlof, Dickens, and Perry (2000).  Read More

  • WP 04-07 | Inflation, Output, and Welfare


    Ricardo Lagos Guillaume Rocheteau

    Abstract

    This paper studies the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework.  Read More

  • WP 03-17 | Inflation and Financial Market Performance: What Have We Learned in the Last Ten Years?


    John Boyd Bruce Champ

    Abstract

    The last decade has witnessed a great deal of theoretical and empirical research on the relationships between inflation, financial market performance, and economic growth.  Read More

  • WP 02-15 | Do Energy-Price Shocks Affect Core-Price Measures?


    Owen F Humpage Eduard Pelz

    Abstract

    This paper investigates the relationship between energy-price shocks and three core measures of inflation in a vector autoregression model that incorporates measures of monetary policy and inflation expectations.  Read More

  • WP 98-12 | Expectations, Credibility, and Time-Consistent Monetary Policy


    Peter Ireland

    Abstract

    This paper addresses the problem of multiple equilibria in a model of time-consistent monetary policy.  Read More

  • WP 98-19 | Price-Level and Interest-Rate Targeting in a Model with Sticky Prices


    Charles T Carlstrom Timothy S Fuerst

    Abstract

    This paper examines a standard sticky price monetary model.  Read More

  • WP 97-13 | Expectations, Credibility, and Disinflation in a Small Macroeconomic Model


    Chan G Huh Kevin Lansing

    Abstract

    We use a version of the Fuhrer-Moore model to study the effects of expectations and central bank credibility on the economy’s dynamic transition path during a disinflation.  Read More

  • WP 97-07 | Efficient Inflation Estimation


    Michael F Bryan Stephen Cecchetti Rodney II Wiggins

    Abstract

    This paper investigates the use of trimmed means as high-frequency estimators of inflation.  Read More

  • WP 96-17 | Inflation and Financial Market Performance


    John Boyd Ross Levine Bruce Smith

    Abstract

    In this paper we investigate the empirical association between inflation and the functioning of an economy's financial system.  Read More

  • WP 94-18 | The Effects of Inflation on Wage Adjustments in Firm-Level Data: Grease or Sand?


    Erica Groshen Mark E Schweitzer

    Abstract

    An analysis of whether inflation facilitates adjustments to shocks or distorts relative prices, examining wage-setting process across a panel of occupations and employers and finding costs of inflation may rise more rapidly than its benefits.  Read More

  • WP 93-04 | Measuring Core Inflation


    Michael F Bryan Stephen Cecchetti

    Abstract

    An analysis of limited-information estimators as measures of core inflation, showing that these estimators have a higher correlation with past money growth and deliver improved forecasts of future inflation relative to the Consumer Price Index.  Read More

  • WP 91-02 | Inflation, Personal Taxes, and Real Output: A Dynamic Analysis


    David Altig Charles T Carlstrom

    Abstract

    An examination, using the overlapping-generations approach, of how the interactions between inflation and the nominal taxation of capital income affect the cyclical behavior of the U.S. economy.  Read More

  • WP 90-06 | Inflation and the Personal Tax Code: Assessing Indexation


    David Altig Charles T Carlstrom

    Abstract

    A reexamination of the potential costs of anticipated inflation in view of the inflation indexing system established during the 1980s.  Read More

  • WP 90-05 | In Defense of Zero Inflation


    William Gavin

    Abstract

    An argument supporting zero inflation as the sole objective of monetary policy, with particular emphasis on the Bank of Canada's commitment to an explicit, low inflation target.  Read More

  • WP 89-01 | The Effects of Disinflationary Policies on Monetary Velocity


    William Gavin William G Dewald

    Abstract

    Is the recent decline in monetary velocity the result of deregulation or disinflation?  Read More

  • WP 87-05 | An Analysis of Causal Relations Among Inflation, Financial Structure, Tobin's Q and Investment


    William P Osterberg

    Abstract

    An examination of the short- and long-run effects of inflation on financial markets and investment.  Read More

  • WP 85-05 | Dynamics of Fixprice Model


    Eric Kades

    Abstract

    This paper examines the dynamics of a class of disequilibrium models developed in an earlier paper (Working Paper 8504) and uses both graphics and analysis to show that non-Walrasian equilibria can be steady states for disequilibrium models.  Read More