Measuring Inflation Anchoring and Uncertainty: A US and Euro Area Comparison

“…For instance, Łyziaka and Paloviita (2017) use data from the ECB's SPF and find that inflation expectations in the euro area have shown signs of de-anchoring after 2014, featuring an excess sensitivity to changes in the short-term inflation expectations and in current inflation rates. Grishchenko, Mouabbi and Renne (2019), using survey data, find that after the Great Recession inflation anchoring improved in the United States while a mild de-anchoring occurred in the euro area. At the end of the sample, in mid-2016, inflation expectations were broadly anchored in both economies.…”

Section: Introductionmentioning

confidence: 99%

Anchored or de-anchored? That is the question

Corsello

Neri

Tagliabracci

2021

European Journal of Political Economy

View full text Add to dashboard Cite

This paper shows that long-term inflation expectations have become de-anchored from the ECB Governing Council's inflation aim. The long-term expectations in the ECB's Survey of Professional Forecasters have not returned to the levels that prevailed before the 2013-14 period of disinflation, and their distribution is still skewed towards lower inflation levels. Moreover, long-term expectations have become sensitive to short-term ones and to negative inflation surprises. Forecasters who participated in most of the surveys are the most responsive to short-term developments in inflation.

show abstract

“…6 Instead of looking at the mean/median/mode values of inflation expectations, we should perhaps look at measures of expectation uncertainty. Thus, we could follow the approach of Grishchenko et al (2017). For that purpose, we compute the probability that expectations fall inside some range of values.…”

Section: Analysis Of the Response Ratesmentioning

confidence: 99%

Long-run inflation expectations in the ECB survey of professional forecasters: what do the survey responses tell us?

Oinonen

Virén

2020

View full text Add to dashboard Cite

Research background: At the background, there are issues related to policy credibility and policy targets. For these issues, long-term forecasts can provide important information. Of course, long-term forecasts are needed also e.g. for evaluation of real returns. Purpose of the article: This paper tries to find out how informative the ECB Survey of Professional Forecasters data on long-term inflation prospects are from the point of view of the overall quality of the survey and on the other hand from the point of view of monetary policy credibility. Methods: The analysis makes use of individual forecaster level quarterly panel data for the period 1999Q1?2018Q4. Conventional panel econometrics tools are used to find out whether forecasts are sensitive to changes in actual inflation and other relevant variables. Findings & Value added: We find some weaknesses considering the size of the survey, the selection of the sample (more precisely the participation to the survey) and the inertial responses of forecasters which suggest that the survey values are not actively updated. Moreover, we find that towards the end of the sample period, the survey values are related to actual inflation and to short-term expectations, which is not consistent with the credibility of the official inflation target.

show abstract

Measuring Inflation Anchoring and Uncertainty: A US and Euro Area Comparison

Cited by 5 publications

References 22 publications

The First Twenty Years of the European Central Bank: Monetary Policy

The First Twenty Years of the European Central Bank: Monetary Policy

Anchored or de-anchored? That is the question

Long-run inflation expectations in the ECB survey of professional forecasters: what do the survey responses tell us?

Contact Info

Product

Resources

About