Macroeconomic Surprises and the Inflation Compensation Curve in the Euro Area

J. Coffinet and Sébastien Frappa ()

Documents de Travail from Banque de France

Abstract: Using daily data stemming from inflation-indexed markets, we analyse the effects of numerous macroeconomic surprises on inflation compensation data - the sum of inflation expectations, risk and liquidity premia - in the euro area between 2 January 2004 and 31 December 2007. Our results suggest that when gauging short and medium-term inflation compensations, market operators are sensitive to surprises related to real activity and prices. Interestingly, oil futures prices tend to impact at some point on the short- and medium-ends of the inflation compensation curve. Notwithstanding, long-term inflation compensations remain generally unresponsive to macroeconomic surprises, attesting the high ECB's credibility.

Keywords: Inflation Compensation; Macroeconomic Surprise, Eurosystem (search for similar items in EconPapers)
JEL-codes: E31 E44 E58 (search for similar items in EconPapers)
Date: 2008
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