Asset prices can signal abnormal inflation rates, paper argues
But “transmission time can be quite long”, researchers say
A working paper published by the Netherlands Bank examines whether certain financial variables can give information about future "abnormal" inflation rates – either very low inflation or deflation, or high inflation.
In The signalling content of asset prices for inflation: implications for quantitative easing, Leo de Haan and Jan Willem van den End investigate data from 11 advanced economies over the past three decades.
They use a receiver operating characteristic curve and a logit model to
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