What Do Long Data Tell Us About the Inflation Hike Post COVID-19 Pandemic? /
To what extent is the recent spike in inflation driven by a change in its permanent component? We estimate a semi-structural model of output, inflation, and the nominal interest rate in the United States over the period 1900-2021. The model predicts that between 2019 and 2021 the permanent component...
Gespeichert in:
- 1. Verfasser:
- Körperschaft:
- Weitere Verfasser:
- Format:
- Elektronisch E-Book
- Sprache:
- Englisch
- Veröffentlicht:
-
Cambridge, Mass.
National Bureau of Economic Research
2022.
- Zusammenfassung:
-
To what extent is the recent spike in inflation driven by a change in its permanent component? We estimate a semi-structural model of output, inflation, and the nominal interest rate in the United States over the period 1900-2021. The model predicts that between 2019 and 2021 the permanent component of inflation rose by 51 basis points. If instead we estimate the model using postwar data (1955--2021), the permanent component of inflation is predicted to have increased by 238 basis points. A possible interpretation of this finding is that the model estimated on the shorter sample assigns a larger increase in the permanent component of inflation because the period 1955-2021 does not contain sudden sparks in inflation like the one observed in the aftermath of the COVID-19 pandemic but only gradual ones---the great inflation of the 70s took more than 10 years to build up. By contrast, the period 1900-1954 is plagued with sudden inflation hikes---including one around the 1918 Spanish flu pandemic---which the estimated model endogenously recalls and uses to interpret inflation around the COVID-19 episode. This result suggests that prewar data might be of use to understand recent inflation dynamics.
- Umfang:
- 1 online resource: illustrations (black and white);
- Anmerkungen:
- August 2022.
- Schlagworte: