2018年-BIS国际清算银行_Has_inflation_targeting_become_less_credible_46页_1mb

Summary of "Has Inflation Targeting Become Less Credible?"

Core Content

This working paper investigates whether the credibility of inflation targeting has been affected by the global financial crisis (GFC). The authors analyze the relationship between oil prices and inflation expectations, particularly focusing on medium-term and forward-looking expectations, to assess the impact of global aggregate demand on inflation expectations and the potential erosion of inflation targeting credibility.

Main Points

• Correlation Increase: After the GFC, the correlation between oil prices and medium-term inflation expectations (measured by five-year breakeven inflation rates) and forward-looking inflation expectations (five-years to five-years breakeven rates) increased significantly.
• Anchoring Concerns: Central bankers have expressed concerns that this increased correlation might indicate a loss of anchoring of inflation expectations, which could affect the credibility of inflation targeting.
• Global Aggregate Demand: The authors use the first principal component of commodity prices as a proxy for global aggregate demand. This factor is found to be strongly correlated with the global output gap.
• Structural Change: There is evidence of a structural change in the effect of global demand on inflation expectations following the GFC. However, this does not necessarily imply un-anchoring of inflation expectations.
• Model Findings: Using a structural Phillips Curve framework, the authors find that the increased correlation between oil prices and inflation expectations is mainly due to the stronger influence of global aggregate demand on inflation expectations. They cannot reject the hypothesis that inflation expectations remained anchored.
• Instrumental Variables: To isolate the effect of global aggregate demand, the authors use instrumental variables such as OPEC's strategic behavior and weather-related demand shocks. These variables help to control for idiosyncratic factors affecting oil prices.

Key Information

• Data Sources: The study uses data from Bloomberg, the Bank of Israel, and the London Times. It also incorporates temperature data from the National Climatic Data Center (NCEI).
• Methodology: The authors employ principal component analysis (PCA) to decompose commodity price changes and extract a global aggregate demand factor. They also use a reduced-form global Phillips Curve approach.
• Empirical Results:
  • The correlation between oil prices and five-year breakeven inflation rates increased from -0.34 to 0.60 between 2004-2008 and 2008-2017.
  • The correlation between oil prices and five-years to five-years breakeven rates increased from 0.03 to 0.62.
  • The first principal component of commodity prices explains 29% of the variance in the data and is strongly correlated with the global output gap (correlation coefficient > 0.85).
• Implications: The increased volatility of inflation expectations may not necessarily indicate un-anchoring. However, it raises concerns about the long-term credibility of inflation targeting, especially with the decline in long-term inflation expectations since 2014.
• OPEC and Weather Shocks: The authors construct a proxy for OPEC's behavior using articles from the London Times and examine the impact of extreme weather on oil demand, using temperature data from five continents.

Conclusion

The paper concludes that while there has been a structural change in the correlation between oil prices and inflation expectations, the hypothesis of un-anchoring cannot be rejected. The increased correlation is attributed to the stronger influence of global aggregate demand on inflation expectations, rather than a loss of credibility. The authors emphasize the importance of considering the potential implications of this trend for monetary policy and economic modeling.