On Thursday, June 21, noon-14 pm, Geraldine Dany-Knedlik from the DIW Berlin will be the speaker of the Research Seminar in Economics. She will present her research paper on "Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations" at Kaminzimmer (room 202), Boltzmannstraße 20, Berlin-Dahlem.
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.
For further information about the Research Seminar in Economics and its program, please click here.