Research Seminar in Economics by Geraldine Dany-Knedlik (DIW Berlin)
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.
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