Inflation News and Euro Area Inflation Expectations

García, Juan Ángel; Werner, Sebastian

doi:10.5089/9781484363010.001

“…Yetman (2017) and Beaudry and Ruge-Murcia (2017) find that the implementation of inflation targeting in Canada and the United Kingdom has been more successful than that in other inflation targeting countries. 30 Garcia and Werner (2018) find that there has been a decline in the extent of anchoring inflation expectations in the Euro Area since 2013. 31 For instance, the Central Bank of Chile's quarterly inflation report included, from its inception, inflation forecasts with confidence intervals displayed in fan charts of the type pioneered by the Bank of England (Mishkin 2007). targeting and consistently high central bank transparency may have been key to anchoring expectations.…”

Section: Anchoring Expectations: Country Experiencesmentioning

confidence: 99%

“…During a longer post-crisis period in the Euro Area, when inflation fell and was persistently below target, there is evidence that the anchoring of inflation expectations weakened (Grishchenko, Mouabbi, and Renne 2017;Garcia and Werner 2018). The findings, which are based on different methodologies and different measures of inflation expectations, are less consistent for the United States, where anchoring is alternately found to have improved and deteriorated significantly in the post-crisis period (Ciccarelli, Garcia, and Montes-Galdón 2017;Grishchenko, Mouabbi, and Renne 2017).…”

Section: Reis 2002)mentioning

confidence: 99%

“…The sensitivity of long-term inflation expectations to inflation shocks is used in this paper to measure the degree of anchoring of inflation expectations. This measure is employed in several previous studies(Beechey, Johannsen, and Levin 2011;Galati, Poelhekke, and Zhou 2011;Gürkaynak, Levin, and Swanson 2010;IMF 2016;Garcia and Werner 2018;De Pooter et al 2014). Other previous studies employ different measures of anchoring of inflation expectations: the deviation of long-term inflation expectations from an inflation target(Buono and Formai 2018;Bordo and Siklos 2017), variance of inflation expectations(Grishchenko, Mouabbi, and Renne, 2017), and dispersion of inflation forecasts(Capistrán and Ramos-Francia 2010).…”

mentioning

confidence: 99%

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Inflation Expectations: Review and Evidence

Kose¹,

Matsuoka²,

Panizza³

et al. 2019

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This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced economies, despite notable improvements over the past two decades. Indeed, in EMDEs, long-term inflation expectations are more sensitive to both domestic and global inflation shocks. However, EMDEs tend to be more successful in anchoring inflation expectations in the presence of an inflation targeting regime, high central bank transparency, strong trade integration, and a low level of public debt.Abstract. This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced economies, despite notable improvements over the past two decades. Indeed, in EMDEs, long-term inflation expectations are more sensitive to both domestic and global inflation shocks. However, EMDEs tend to be more successful in anchoring inflation expectations in the presence of an inflation targeting regime, high central bank transparency, strong trade integration, and a low level of public debt.

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“…Yetman (2017) and Beaudry and Ruge-Murcia (2017) find that the implementation of inflation targeting in Canada and the United Kingdom has been more successful than that in other inflation targeting countries. 30 Garcia and Werner (2018) find that there has been a decline in the extent of anchoring inflation expectations in the Euro Area since 2013. 31 For instance, the Central Bank of Chile's quarterly inflation report included, from its inception, inflation forecasts with confidence intervals displayed in fan charts of the type pioneered by the Bank of England (Mishkin 2007).…”

Section: Anchoring Expectations: Country Experiencesmentioning

confidence: 99%

“…21 The sensitivity of long-term inflation expectations to inflation shocks is used in this paper to measure the degree of anchoring of inflation expectations. This measure is employed in several previous studies (Beechey, Johannsen, and Levin 2011;Galati, Poelhekke, and Zhou 2011;Gürkaynak, Levin, and Swanson 2010;IMF 2016;Garcia and Werner 2018;De Pooter et al 2014). Other previous studies employ different measures of anchoring of inflation expectations: the deviation of long-term inflation expectations from an inflation target (Buono and Formai 2018; Bordo and Siklos 2017), variance of inflation expectations (Grishchenko, Mouabbi, and Renne, 2017), and dispersion of inflation forecasts (Capistrán and Ramos-Francia 2010).…”

Section: Evolution Of Inflation Expectationsmentioning

confidence: 99%

Inflation Expectations: Review and Evidence

Kose,

Matsuoka,

Panizza

et al. 2019

View full text Add to dashboard Cite

This paper presents a comprehensive examination of the determination and evolution of inflation expectations, with a focus on emerging market and developing economies (EMDEs). The results suggest that long-term inflation expectations in EMDEs are not as well anchored as those in advanced economies, despite notable improvements over the past two decades. Indeed, in EMDEs, long-term inflation expectations are more sensitive to both domestic and global inflation shocks. However, EMDEs tend to be more successful in anchoring inflation expectations in the presence of an inflation targeting regime, high central bank transparency, strong trade integration, and a low level of public debt.

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Changes in inflation compensation and oil prices: short-term and long-term dynamics

Cabral

¹

,

Ribeiro

²

,

Nicolau

³

2021

Empir Econ

1

0

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This paper investigates the relationship between changes in euro area short-term and long-term market-based inflation expectations from January 2005 to September 2018, also devoting special attention to the relevance of the oil market. The full sample is split into three subsets related to different economic and financial landscapes. To model the conditional mean and the variance-covariance structure, a VAR-CCC-GARCH specification with oil effects in the volatility proves to be a preferable approach compared to other multivariate GARCH models. In general, the conditional correlation between changes in short-term and long-term inflation compensation appears as constant and relatively low in each subset, though increasing since mid-2014. Furthermore, there are no signs of fundamental deviations in how changes in short-term inflation expectations affect changes in longer-term expectations and vice versa. There is evidence that changes in short-term inflation expectations tend to respond to the movements of oil prices over time, while changes in longer-term ones started responding to crude dynamics after mid-2008. On the whole, these findings are relevant for analysts, investors and especially for the policymakers who charged with ensuring price stability.

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Inflation News and Euro Area Inflation Expectations

Cited by 9 publications

References 24 publications

Inflation Expectations: Review and Evidence

Inflation Expectations: Review and Evidence

Inflation Expectations: Review and Evidence

Changes in inflation compensation and oil prices: short-term and long-term dynamics

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