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Inflation dynamics during the financial crisis in Europe : cross-sectional identification of long-run inflation expectations / Geraldine Dany-Knedlik, Oliver Holtemöller
VerfasserDany-Knedlik, Geraldine ; Holtemöller, Oliver
ErschienenHalle (Saale), Germany : Halle Institute for Economic Research (IWH), 27. April 2017
Umfang1 Online-Ressource (III, 55 Seiten, 8,52 MB) : Diagramme
SpracheEnglisch
SerieIWH-Diskussionspapiere ; 2017, no. 10 (December 2017)
URNurn:nbn:de:gbv:3:2-82318 
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Inflation dynamics during the financial crisis in Europe [8.52 mb]
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We investigate drivers of Euro area inflation dynamics using a panel of regional Phillips curves and identify long-run inflation expectations by exploiting the crosssectional dimension of the data. Our approach simultaneously allows for the inclusion of country-specific inflation and unemployment-gaps, as well as time-varying parameters. Our preferred panel specification outperforms various aggregate, uni- and multivariate unobserved component models in terms of forecast accuracy. We find that declining long-run trend inflation expectations and rising inflation persistence indicate an altered risk of inflation expectations de-anchoring. Lower trend inflation, and persistently negative unemployment-gaps, a slightly increasing Phillips curve slope and the downward pressure of low oil prices mainly explain the low inflation rate during the recent years.