NDLI: The Evolution of Inflation Expectations in Euro Area Markets

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The Evolution of Inflation Expectations in Euro Area Markets

Content Provider	Scilit
Author	Gimeno, Ricardo Ortega, Eva
Copyright Year	2016
Description	Journal: SSRN Electronic Journal This paper explores the behaviour of inflation expectations across countries that share their monetary policy, in particular those of the European Monetary Union. We investigate the possible common features at the various horizons, as well as differentials across euro area countries. A multi-country dynamic factor model based on Diebold et al. (2008), where we also add a liquidity risk component, is proposed and estimated using daily data from inflation swaps for Spain, Italy, France, Germany and the euro area as a whole, and for a wide range of horizons. It allows us to calculate the proportion of common vs country-specific components in the term structure of inflation expectations. We find sizable differences in inflation expectations across the main euro area countries only at short maturities, while in general a common component predominates throughout the years, especially at long horizons. The common long-run level of inflation expectations is estimated to have fallen since late 2014, while an increased persistence of lower expected inflation and for longer horizons is estimated from 2012. There has been no reversal in either of these characteristics following the announcement and implementation of the ECB’s unconventional monetary policy measures.
Related Links	http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/16/Fich/dt1627e.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2877655
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.2877655
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2016-11-30
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal History and Philosophy of Science Inflation Expectations
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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