Economic surprises and inflation expectations: Has anchoring of expectations survived the crisis?

Magdalena Grothe and Søren Lejsgaard Autrup

No 1671, Working Paper Series from European Central Bank

Abstract: This paper analyses price formation in medium- to longer-term maturity segments of euro area and US inflation-linked and nominal bond markets around the releases of important economic indicators. We compare the pre-crisis and crisis periods, controlling for liquidity effects observed in financial markets. The results allow us to draw conclusions about the anchoring of inflation expectations in the two currency areas before and during the crisis. We find a somewhat stronger anchoring of inflation expectations in the euro area than in the United States. During the crisis, the degree of anchoring of inflation expectations did not change in the euro area, but it decreased to some extent in the United States. JEL Classification: E44, G12, G01

Keywords: break-even inflation rates; inflation expectations; inflation markets; macroeconomic announcements; nominal and real bond yields (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Note: 1601201
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20141671

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