Missing disinflation and missing inflation: the puzzles that aren't

Arbeitspapier

In the immediate wake of the Great Recession we didn't see the disinflation that most models predicted and, subsequently, we didn't see the inflation they predicted. We show that these puzzles disappear in a Vector Autoregressive model that properly accounts for domestic and global factors. Such a model reveals, among others, that domestic factors explain much of the inflation dynamics in the 2012-2014 euro area missing inflation episode. Consequently, economists and models that excessively focused on the global nature of inflation were liable to miss the contribution of deflationary domestic shocks during this episode.

Object Details

• ISBN: 978-92-899-2722-2
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2000

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles ; International Business Cycles
• Subject: Bayesian vector autoregression ; conditional forecast ; inflation dynamics ; international transmission of shocks ; Phillips curve ; shock identification

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bobeica, Elena ; Jarociński, Marek
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2017

Further information

• DOI: doi:10.2866/846401
• Handle: http://hdl.handle.net/10419/154433
• Last update: 10.03.2025, 11:43 AM CET