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The role of long-term inflation expectations for the transmission of monetary policy shocks

Max Diegel and Dieter Nautz ()

No 2020/19, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: This paper empirically investigates the role of long-term inflation expectations for the monetary transmission mechanism. In contrast to earlier studies, we confirm that U.S. long-term inflation expectations respond significantly to a monetary policy shock. In line with a re-anchoring channel of monetary policy, we find that long-term inflation expectations play an important role for the transmission of monetary policy shocks to the rate of inflation. Our results are robust with respect to the identification strategy and alternative monetary policy indicators applied during the zero lower bound period.

Keywords: Long-Term Inflation Expectations; Monetary Policy; Structural Vector Autoregression; Sign and Zero Restrictions (search for similar items in EconPapers)
JEL-codes: C32 E31 E52 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:202019

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