Are long-run inflation expectations anchored more firmly in the Euro area than in the United States?

Meredith J. Beechey, Benjamin K. Johannsen and Andrew Theo Levin ()

No 2008-23, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper compares the recent evolution of long-run inflation expectations in the euro area and the United States, using evidence from financial markets and surveys of professional forecasters. Survey data indicate that long-run inflation expectations are reasonably well-anchored in both economies, but also reveal substantially greater dispersion across forecasters' long-horizon projections of U.S. inflation. Daily data on inflation swaps and nominal-indexed bond spreads--which gauge compensation for expected inflation and inflation risk--also suggest that long-run inflation expectations are more firmly anchored in the euro area than in the United States. In particular, surprises in macroeconomic data releases have significant effects on U.S. forward inflation compensation, even at long horizons, whereas macroeconomic news only influences euro area inflation compensation at short horizons.

Keywords: Inflation (Finance) - United States; Inflation (Finance) - Euro area; Banks and banking, Central (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2008
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Related works:
Working Paper: Are Long-Run Inflation Expectations Anchored More Firmly in the Euro Area than in the United States? (2007)
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