Inflation News and Euro Area Inflation Expectations
IMF Working Papers, July 19, 2018
Source details
- Canonical URL
- Inflation News and Euro Area Inflation Expectations
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Bibliographic details
- Authors: Juan Angel Garcia, Sebastian Werner
- Published: July 19, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484363010.001
Summary
- Research question: Do euro area inflation expectations remain well-anchored?
- Key conclusion: The protracted period of low (and below-target) inflation in the euro area since 2013 has weakened the anchoring of inflation expectations.
- Empirical advance: Results point to a significant impact of inflation news over recent years that had not been observed before in the euro area.
Methodology and Scope
- Data coverage: Analyzes all available (advanced) inflation releases.
- Econometric approach:
- Tests sensitivity of expectations to inflation and macroeconomic news.
- Investigates reactions of expectations using daily, time-varying, and intraday frequency regressions to add robustness to conclusions.
Main Findings
- The anchoring of euro area inflation expectations weakened after a protracted period of low and below-target inflation since 2013.
- Inflation news has a significant impact on euro area inflation expectations in recent years, a pattern not previously observed in the euro area literature.
- Robustness checks performed through high-frequency (daily and intraday) and time-varying regressions support the main result.
Subject Areas and Keywords
- Subjects: Financial crises, Global financial crisis of 2008-2009, Inflation, National accounts, Prices, Return on investment
- Keywords: flash estimate, Global, Global financial crisis of 2008-2009, inflation, inflation compensation, inflation expectation, inflation market, inflation news, inflation rate, macroeconomic news, market-based inflation expectations, monetary policy, Return on investment, swap market, swap rate, WP
Content in this bundle
- Inflation News and Euro Area Inflation Expectations, WP/18/167, July 2018