Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/154290 
Year of Publication: 
2015
Series/Report no.: 
ECB Working Paper No. 1857
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper investigates the factors behind developments in inflation expectations in euro area, the U.S. and the U.K. over the sample 2005-2015. Our analysis unveils the presence of a quantitatively important spillover from euro area long-term inflation expectations onto international ones, in particular the U.S., since August 2014. This finding has some important implications. From a policy perspective, it contributes to explain the somewhat puzzling declines in financial indicators of inflation expectations since the autumn 2014 (Yellen, 2015). From a research perspective, our findings suggest that the relatively weak performance of term-structure models (and other econometric models) to explain developments in long-term inflation expectations in major economic areas over 2014-15 may be due to the omission of international factors. These two dimensions may well carry a significant weight on the on-going and future debate on monetary policy normalisation in major central banks.
Subjects: 
deflation
global inflation
inflation expectations
international spillovers
JEL: 
C11
C52
E31
ISBN: 
978-92-899-1670-7
Document Type: 
Working Paper

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