{
  "title": "Trend Inflation and Inflation Compensation",
  "publication": "IMF Working Papers, July 6, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/07/06/trend-inflation-and-inflation-compensation-45974",
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  "summary": "This paper incorporates market-based inflation expectations to the growing literature on trend inflation estimation, and finds that there has been a significant decline in euro area trend inflation since 2013.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- This paper incorporates market-based inflation expectations into trend inflation estimation literature.\n- Main empirical finding: a significant decline in euro area trend inflation since 2013.\n- The finding is robust to using different measures of long-term inflation expectations in the estimation, both market-based and surveys.\n- Implication highlighted: the evidence (i) supports the expansion of ECB’s UMP measures since 2015; (ii) provides a metric to monitor long-term inflation expectations following their introduction, and the likelihood of a sustained return of inflation towards levels below, but close to, 2% over the medium term."
    },
    {
      "heading": "Key findings",
      "content": "- Significant decline in euro area trend inflation since 2013.\n- Robustness: result holds when using different measures of long-term inflation expectations (market-based and surveys).\n- Policy-relevant interpretation:\n  - Supports the expansion of ECB’s UMP measures since 2015.\n  - Provides a metric to monitor long-term inflation expectations and the likelihood of a sustained return of inflation towards levels below, but close to, 2% over the medium term."
    },
    {
      "heading": "Methodology note",
      "content": "- The paper incorporates market-based inflation expectations into trend inflation estimation.\n- Keywords and methodological terms in the source: IL swap market, inflation compensation, inflation expectation, inflation persistence, market-based inflation expectations, state space model, stochastic volatility, swap rate, trend inflation."
    },
    {
      "heading": "Subjects and scope",
      "content": "- Subject areas listed: Financial crises, Global financial crisis of 2008-2009, Inflation, Inflation persistence, National accounts, Prices, Return on investment.\n- Geographic scope: Global (with a focused empirical result for the euro area).\n\nSource: IMF Working Paper by Juan Angel Garcia and Aubrey Poon, July 6, 2018.\n\n---\n\n Content in this bundle\n\n- Trend Inflation and Inflation Compensation, WP/18/154, July 2018\n  - Trend Inflation and Inflation Compensation, WP/18/154, July 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Trend Inflation and Inflation Compensation, WP/18/154, July 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/07/06/trend-inflation-and-inflation-compensation-45974"
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    "Authors: Juan Angel Garcia, Aubrey Poon",
    "Published: July 6, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484362402.001",
    "This paper incorporates market-based inflation expectations into trend inflation estimation literature.",
    "Main empirical finding: a significant decline in euro area trend inflation since 2013.",
    "The finding is robust to using different measures of long-term inflation expectations in the estimation, both market-based and surveys.",
    "Implication highlighted: the evidence (i) supports the expansion of ECB’s UMP measures since 2015; (ii) provides a metric to monitor long-term inflation expectations following their introduction, and the likelihood of a sustained return of inflation towards levels below, but close to, 2% over the medium term.",
    "Significant decline in euro area trend inflation since 2013.",
    "Robustness: result holds when using different measures of long-term inflation expectations (market-based and surveys).",
    "Policy-relevant interpretation:",
    "The paper incorporates market-based inflation expectations into trend inflation estimation.",
    "Keywords and methodological terms in the source: IL swap market, inflation compensation, inflation expectation, inflation persistence, market-based inflation expectations, state space model, stochastic volatility, swap rate, trend inflation.",
    "Subject areas listed: Financial crises, Global financial crisis of 2008-2009, Inflation, Inflation persistence, National accounts, Prices, Return on investment.",
    "Geographic scope: Global (with a focused empirical result for the euro area).",
    "**Trend Inflation and Inflation Compensation, WP/18/154, July 2018**"
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