IDEAS home Printed from https://ideas.repec.org/a/ecb/ecbbox/202400037.html
   My bibliography  Save this article

The role of technical factors in euro area inflation-linked swap rates

Author

Listed:
  • Munch Grønlund, Asger
  • Jørgensen, Kasper
  • Schupp, Fabian

Abstract

When long-term inflation-linked swap (ILS) rates for the euro area peaked in summer 2023, some observers expressed concerns that ILS rates reflected not only inflation compensation, but also non-fundamental “technical” factors. Such factors potentially reduced the usefulness of ILS rates in terms of gauging inflation expectations and risks. This box contributes to that discussion using a novel econometric approach, suggesting that there is, on average, little scope for technical factors to affect ILS rates. At the same time, the results also suggest that the signal from ILS rates may have been distorted somewhat during episodes of extremely high market volatility (e.g. the global financial crisis, the start of the COVID-19 pandemic and the aftermath of the Russian invasion of Ukraine). However, those distortions were short-lived and mainly affected short-term ILS rates, while longer maturities appear to have been less affected. JEL Classification: E44, G12, G13

Suggested Citation

  • Munch Grønlund, Asger & Jørgensen, Kasper & Schupp, Fabian, 2024. "The role of technical factors in euro area inflation-linked swap rates," Economic Bulletin Boxes, European Central Bank, vol. 3.
    • Handle: RePEc:ecb:ecbbox:2024:0003:7
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//press/economic-bulletin/focus/2024/html/ecb.ebbox202403_07~668fc73c60.en.html
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Bernardini & Lara D'Arrigo & Alessandro Lin & Andrea Tiseno, 2024. "Real interest rates and the ECB's monetary policy stance," Questioni di Economia e Finanza (Occasional Papers) 857, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    inflation; Market-based inflation compensation; market imperfections;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbbox:2024:0003:7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.