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The Impact of Forward Guidance on Inflation Expectations: Evidence from the ECB

Marc de la Barrera, Juraj Falath, Dorian Henricot and Jean-Alexandre Vaglio

No 1010, Working Papers from Barcelona Graduate School of Economics

Abstract: This paper empirically investigates the impact of forward guidance announcements on inflation expectations in the Eurozone. We identify forward guidance shocks as changes in the 2-year nominal ECB yield on specific announcement days to measure changes in daily inflation swaps of different maturities. In the process, we also separately identify the effect of quantitative easing and interest rate change announcement shocks. We find that forward guidance was successful in reviving inflation expectations across maturities. Analyzing the transmission channels of forward guidance, we find evidence that both a reanchoring channel and a portfolio effect might have been at play.

Keywords: unconventional monetary policies; forward guidance; inflation expectations; empirical macroeconomics (search for similar items in EconPapers)
JEL-codes: E31 E52 E65 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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