Arbeitspapier
A money-based indicator for deflation risk
We employ a money-based early warning model in order to analyse the risk of a low inflation regime in the euro area, Japan and the US. The model specification allows for three different inflation regimes: Low, Medium and High inflation, while state transition probabilities vary over time as a function of monetary variables. Using Bayesian techniques, we estimate the model with data from the early 1970s up to the present. Our analysis suggests that the risks of a Low inflation regime in the euro area have been increasing in the course of the last six quarters of the sample; moreover, money growth appears to play a significant role in the assessment of such risks. Evidence for Japan and the US, on the other hand, shows that the inclusion of a monetary indicator variable does not substantially change the assessment of the risk of a Low inflation regime in either of the two countries.
- Language
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Englisch
- Bibliographic citation
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Series: DEP (Socioeconomics) Discussion Papers - Macroeconomics and Finance Series ; No. 3/2014
- Classification
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Wirtschaft
Bayesian Analysis: General
Forecasting Models; Simulation Methods
Price Level; Inflation; Deflation
- Subject
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Money growth
deflation
inflation regimes
Markov Switching models
Bayesian inference
- Event
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Geistige Schöpfung
- (who)
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Amisano, Gianni
Colavecchio, Roberta
Fagan, Gabriel
- Event
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Veröffentlichung
- (who)
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Hamburg University, Department Socioeconomics
- (where)
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Hamburg
- (when)
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2014
- Handle
- Last update
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10.03.2025, 11:45 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Amisano, Gianni
- Colavecchio, Roberta
- Fagan, Gabriel
- Hamburg University, Department Socioeconomics
Time of origin
- 2014