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The role of the ECB’s asset purchases in preventing a potential de-anchoring of longer-term inflation expectations

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Listed:
  • Coenen, Günter
  • Schmidt, Sebastian

Abstract

Longer-term inflation expectations are generally seen to be an indicator of the credibility of central banks in achieving their price stability objectives and should, therefore, remain solidly “anchored”. In this article, we argue on the basis of counterfactual analysis that the ECB’s expanded asset purchase programme has been important in preventing a potential de-anchoring of inflation expectations and a further prolongation of the period of low inflation outcomes. JEL Classification: E31, E32, E37, E52, E58

Suggested Citation

  • Coenen, Günter & Schmidt, Sebastian, 2016. "The role of the ECB’s asset purchases in preventing a potential de-anchoring of longer-term inflation expectations," Research Bulletin, European Central Bank, vol. 25.
    • Handle: RePEc:ecb:ecbrbu:2016:0025:
    Note: 241047
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    References listed on IDEAS

    as
    1. Warne, Anders & Coenen, Günter & Christoffel, Kai, 2008. "The new area-wide model of the euro area: a micro-founded open-economy model for forecasting and policy analysis," Working Paper Series 944, European Central Bank.
    2. Refet S. Gürkaynak & Andrew T. Levin & Andrew N. Marder & Eric T. Swanson, 2007. "Inflation Targeting and the Anchoring of Inflation Expectations in the Western Hemisphere," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 11, pages 415-465, Central Bank of Chile.
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    Citations

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    Cited by:

    1. Athanasios Orphanides, 2020. "The fiscal–monetary policy mix in the euro area: challenges at the zero lower bound," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 35(103), pages 461-517.
    2. Francesco Paolo Mongelli & Gonzalo Camba-Mendez, 2018. "The Financial Crisis and Policy Responses in Europe (2007–2018)," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(4), pages 531-558, December.
    3. Schmidt, Sebastian, 2016. "The effective lower bound: some implications for inflation dynamics beyond the current low interest rate environment," Research Bulletin, European Central Bank, vol. 29.
    4. Coenen, Günter & Karadi, Peter & Schmidt, Sebastian & Warne, Anders, 2018. "The New Area-Wide Model II: an extended version of the ECB’s micro-founded model for forecasting and policy analysis with a financial sector," Working Paper Series 2200, European Central Bank.
    5. Karadi, Peter, 2017. "The ECB’s announcements of non-standard measures and longer-term inflation expectations," Research Bulletin, European Central Bank, vol. 33.
    6. Sebastian Schmidt, 2016. "The effective lower bound: some implications for inflation dynamics beyond the current low interest rate environment," Research Bulletin, European Central Bank, vol. 29.
    7. repec:ecb:ecbrbu:2016:0029:1 is not listed on IDEAS
    8. repec:ecb:ecbrbu:2017:0033:1 is not listed on IDEAS
    9. Eleni Argiri & Ifigeneia Skotida, 2021. "The 2021 review of the monetary policy strategy of the Eurosystem: an economy of forces," Economic Bulletin, Bank of Greece, issue 54, pages 23-57, December.

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    More about this item

    Keywords

    asset purchases; DSGE modelling; inflation expectations;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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