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Inflation surprises and inflation expectations in the Euro area

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  • Marcello Miccoli
  • Stefano Neri

Abstract

In the second half of 2012, euro area inflation started declining and reached historical lows at the end of 2014. Market-based measures of inflation expectations also declined to unprecedented levels. During this disinflationary period, inflation releases have often surprised analysts on the downside. We provide evidence that inflation ‘surprises’ have significant effects on inflation expectations. The sensitivity of inflation expectations to the surprises, which has varied over time, disappeared after the introduction of the Asset Purchase Programme by the European Central Bank.

Suggested Citation

  • Marcello Miccoli & Stefano Neri, 2019. "Inflation surprises and inflation expectations in the Euro area," Applied Economics, Taylor & Francis Journals, vol. 51(6), pages 651-662, February.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:6:p:651-662
    DOI: 10.1080/00036846.2018.1506085
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    References listed on IDEAS

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    1. Marianna Riggi & Fabrizio Venditti, 2014. "Surprise! Euro area inflation has fallen," Questioni di Economia e Finanza (Occasional Papers) 237, Bank of Italy, Economic Research and International Relations Area.
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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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