Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154429
Authors: 
Natoli, Filippo
Sigalotti, Laura
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 1996
Abstract: 
We compare the degree of anchoring of inflation expectations in the euro area, the United States and the United Kingdom, focusing on the post-crisis period. First of all, we estimate a set of measures of average and tail correlation using inflation swaps and options, following Natoli and Sigalotti (2016). To quantify the degree of anchoring, we also propose a new indicator based on the results of a logistic regression, measuring the odds that strong negative shocks to short-term expectations are channelled to large declines in long-term expectations. The results reveal, for the euro area, an increase in the de-anchoring risk during the last quarter of 2014; while showing a significant reduction after the peak, our de-anchoring indicator remains high and volatile in 2015 and 2016. Expectations in the US and UK are instead found to be firmly anchored.
Subjects: 
anchoring
inflation expectations
inflation options
inflation swaps
option-implied density
tail co-movement
JEL: 
C14
C58
E31
E44
G13
Document Type: 
Working Paper

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