A Trendy Approach to UK Inflation Dynamics
Name
SSRN-id3112827.pdf
Description
Submitted version
Size
867.62 KB
Format
Adobe PDF
Checksum (MD5)
5a9d1b6ce6c3250f82baf30df07012ff
Author(s)
Forbes, Kristin
Forbes, Kristin J
Kirkham, Lewis
Theodoridis, Konstantinos
Date Issued
July 2019
Journal
Manchester School
Publisher
Wiley
Citation
Forbes, Kristin et al. "A Trendy Approach to UK Inflation Dynamics." Forthcoming in Manchester School. © 2019 The University of Manchester and John Wiley & Sons Ltd
Version
Original manuscript
Abstract
This paper focuses on the time series of UK inflation to isolate a low-frequency and slow-moving component (the trend) from deviations around this trend. This slow-moving trend explains a substantial share of UK inflation dynamics. International prices are significantly correlated with the cyclical movements, and the exchange rate is significantly correlated with movements in the persistent trend. The significance of variables emphasized in standard models (i.e. slack and inflation expectations) varies, and the magnitude of their effects is smaller than for commodity prices and exchange rates. These results highlight the sensitivity of UK inflation to external events and provide guidance on how monetary policy should respond.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1111/manc.12293
