Have Inflation Expectations Become Un-anchored? The Role of Oil Prices and Global Aggregate Demand

Nathan Sussman, Osnat Zohar

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Beginning with the global financial crisis (2008), the corre-lation between crude oil prices and medium-term and forward inflation expectations increased, leading to fears of their un-anchoring. Using the first principal component of commodity prices as a measure for global aggregate demand, we decom-pose nominal oil prices to a global demand factor and an idiosyncratic factor. In a Phillips-curve framework, we find a structural change after the collapse of Lehman Brothers when inflation expectations reacted more strongly to global aggregate demand conditions. Within this framework, we find no evidence that expectations became un-anchored.

Original languageEnglish
Pages (from-to)149-192
Number of pages44
JournalInternational Journal of Central Banking
Volume18
Issue number2
StatePublished - Jun 2022
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2022, European Central Bank. All rights reserved.

Fingerprint

Dive into the research topics of 'Have Inflation Expectations Become Un-anchored? The Role of Oil Prices and Global Aggregate Demand'. Together they form a unique fingerprint.

Cite this