Inflation
Subtitle: do expectations trump the gap?
By: by Jeremy M. Piger and Robert H. Rasche
Contributors: Rasche, Robert H.; Federal Reserve Bank of St. Louis
Series: Working paper -- 2006-013A; Working paper (Federal Reserve Bank of St. Louis : Online) -- 2006-013A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2006
Place of publication: St. Louis, Mo.]
Language: eng
Format: [electronic resource] :
Description: "We measure the relative contribution of the deviation of real activity from its equilibrium (the gap), "supply shock" 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"--Federal Reserve Bank of St. Louis web site.
Notes: Title from PDF file as viewed on 6/26/2006.

Includes bibliographical references.

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