Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130752
Authors: 
Speck, Christian
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 04/2016
Abstract: 
Did the decline in inflation rates from 2012 to 2015 and the low levels of market-based inflation expectations lead to de-anchored inflation dynamics in the euro area? This paper is the first time-varying event study to investigate the reaction of inflation-linked swap (ILS) rates - a market-based measure of inflation expectations - to macroeconomic surprises in the euro area. Compared to the pre-crisis period, surprises have a much stronger effect on spot ILS rates during the crisis. Medium-term forward ILS rates remain insensitive to news most of the time, which implies inflation anchoring. Only short periods of sensitivity on the part of medium-term forward ILS rates are identified at times of low inflation or recession. The sensitivity is lower over more distant forecast horizons such that medium-term sensitivity represents an inflation adjustment process and provides evidence for a de-anchoring of inflation expectations or a loss of credibility for the Eurosystem's policy target.
Subjects: 
Inflation Anchoring
Inflation Expectations
Inflation-Linked Swaps
Event Study
Central Banking
JEL: 
E31
E44
G12
G14
ISBN: 
978-3-95729-234-6
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.