Research Handbook on Inflation

Edited by Guido Ascari, University of Pavia, Italy and De Nederlandsche Bank, the Netherlands and Riccardo Trezzi, University of Pavia, Italy and Underlying Inflation, Switzerland

‘The recent global surge of inflation reignited interest in understanding price dynamics and what central banks can do about it. This timely Handbook gathers leading experts to give a comprehensive perspective on many key questions related to inflation. This is an authoritative one-stop source for anybody interested in this subject.’

• ContentsIntroduction to the Research Handbook on Inflation 1 Guido Ascari and Riccardo Trezzi PART I MEASURING INFLATION AND PRICE INDEXES THEORY 1 The theory of the price index 9 Georg Strasser and Riccardo Trezzi 2 Measurement issues 25 Brett Matsumoto and Anya Stockburger 3 Measurement and theory of core inflation 37 Martin Almuzara and Argia Sbordone PART II INFLATION AND MONETARY POLICY 4 Inflation and monetary policy in medium-sized New Keynesian DSGE models 65 Günter Coenen, Falk Mazelis, Roberto Motto, Annukka Ristiniemi, Frank Smets, Anders Warne and Raf Wouters 5 The optimal inflation target: bridging the gap between theory and policy 103 Klaus Adam and Henning Weber 6 Monetary/fiscal policy mix and inflation dynamics 129 Francesco Bianchi, Leonardo Melosi and Anna Rogantini-Picco PART III EMPIRICAL MODELING OF INFLATION DYNAMICS 7 Analysing inflation with semi-structural models 147 Thomas Hasenzagl, Filippo Pellegrino, Lucrezia Reichlin and Giovanni Ricco 8 The slope of the Phillips curve 173 Francesco Furlanetto and Antoine Lepetit 9 Monetary aggregates and inflation: a new view on an old relationship 193 Gianni Amisano and Roberta Colavecchio PART IV DISAGGREGATING INFLATION DYNAMICS: PRICE SETTING MODELS AND PRICE CHANGES AT THE MICRO-LEVEL10 Models of price setting and inflation dynamics 215James Costain and Anton Nakov11 Micro evidence: United States 247Shaowen Luo and Daniel Villar12 Price stickiness in the euro area 273Luca Dedola, Erwan Gautier, Chiara Osbat and Sergio SantoroPART V INFLATION EXPECTATIONS13 Consumer and firm inflation expectations 305Carola Binder and Jane Ryngaert14 Professional forecasters and markets: the term structure of inflation expectations 333S. Borağan Aruoba15 Household disagreement about expected inflation 347Salomé Fofana, Paula Patzelt and Ricardo Reis16 Communication and inflation expectations 369Klodiana Istrefi and Michael McMahonPART VI OPEN ECONOMY AND GLOBAL INFLATION17 An international perspective on inflation during the COVID-19 recovery 391Luca Fornaro and Federica Romei18 Sixty years of global inflation: a post-GFC update 403Raphael Auer, Mathieu Pedemonte and Raphael Schoenle19 Oil price shocks and inflation 433Lutz Kilian and Xiaoqing ZhouPART VII FORECASTING INFLATION20 Inflation forecasting 455Barbara Rossi21 Nowcasting inflation 489Edward S. Knotek II and Saeed Zaman22 Forecasting inflation in the private sector: a practitioner viewpoint 511Alan Detmeister, Laura Rosner-Warburton, Omair Sharif and Jess Eagel PART VIII INFLATION AND MONETARY POLICY IN PRACTICE23 Inflation targeting and monetary policy in practice: the experience of the Bank of Canada 523Mikael Khan24 Inflation targeting and monetary policy in practice: the experience of the Bank of Japan 535Sohei Kaihatsu, Kazuhiro Masaki, Yu Sugioka, Kosuke Takatomi and Hiroki Yamamoto25 Inflation targeting and monetary policy in practice: the experience of the Federal Reserve 549Andrew Figura, David Lebow and Ekaterina Peneva26 Inflation targeting and monetary policy in practice: the experience of the Bank of England 567Simon Lloyd, Huw Pill and Galina Potjagailo27 Inflation targeting and monetary policy in practice: the experience of the European Central Bank 585Carlo Altavilla and Massimo Rostagno28 Inflation targeting and monetary policy in practice: the experience of the Swiss National Bank 599Carlos Lenz and Attilio Zanetti29 Inflation targeting and monetary policy in practice: the experience of RBA and RBNZ 609Renee Fry-McKibbin and C. John McDermott