Decomposing the declining volatility of long-term inflation expectations
The level and volatility of survey-based measures of long-term inflation expectations have come down dramatically over the past several decades. To capture these changes in inflation dynamics, we embed both short- and long-term expectations into a medium-scale VAR model with stochastic volatility. The model estimates attribute most of the marked decline in the volatility of expectations to smaller shocks to long-run inflation expectations. According to our estimates, the volatility of shocks plummeted in the early to mid-1980s, moved to a somewhat higher level that prevailed for much of the 1990s, and then declined to and remained at very low levels.
Year of publication: |
2011
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Authors: | Clark, Todd E. ; Davig, Troy |
Published in: |
Journal of Economic Dynamics and Control. - Elsevier, ISSN 0165-1889. - Vol. 35.2011, 7, p. 981-999
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Publisher: |
Elsevier |
Subject: | Surveys Stochastic volatility Bayesian econometrics |
Saved in:
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