Working Paper presents research work by both Danmarks Nationalbank’s employees and our partners. The series is primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.

Inflation and price development

The formation of inflation expectations under changing inflation regimes

The present paper offers a careful description of empirical identification of possible multiple changes in regime. We apply recently developed tools designed to select between regime-switching models among a broad class of linear and nonlinear regression models and provide a discussion of the impact on the formation of inflation expectations in the presence of multiple and recurrent changes in inflation regimes.