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The common and speci fic components of inflation expectation across European countries

Shi Chen, Wolfgang Härdle () and Weining Wang

No 2020-023, IRTG 1792 Discussion Papers from Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series"

Abstract: Inflation expectation (IE) is often considered to be an important determinant of actual inflation in modern economic theory, we are interested in investigating the main risk factors that determine its dynamics. We fiirst apply a joint arbitrage-free term structure model across different European countries to obtain estimate for country-specific IE. Then we use the two-component and three-component models to capture the main risk factors. We discover that the extracted common trend for IE is an important driver for each country of interest. Moreover a spatial-temporal copula model is tted to account for the non-Gaussian dependency across countries. This paper aims to extract informative estimates for IE and provide good implications for monetary policies.

Keywords: in ation expectation; joint yield-curve modeling; factor model; common trend; spatial-temporal copulas (search for similar items in EconPapers)
JEL-codes: C02 C13 C38 E31 E43 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
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https://www.econstor.eu/bitstream/10419/230829/1/irtg1792dp2020-023.pdf (application/pdf)

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Journal Article: The common and specific components of inflation expectations across European countries (2022) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:irtgdp:2020023

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