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The effect of the Eurosystem expanded Asset Purchase Programme on inflation expectations: evidence from the ECB Survey of Professional Forecasters

Author

Listed:
  • Guido Bulligan

    (Banca d�Italia)

Abstract

This paper investigates the effect of ECB asset purchases on inflation expectations in the euro area, as measured by the ECB Survey of Professional Forecasters. To identify the effects on individual expectations we adopt a panel approach, where the Eurosystem Asset Purchase Programme (APP) shocks are used as covariates to explain the revisions in the individual inflation forecasts; controls for updates in macroeconomic and financial developments are also included. Our results indicate that the first APP announcement in January 2015 resulted in a statistically significant upwards revision of medium term inflation expectations and lowered the forecasters� assessment of the probability of a low inflation regime. The average effect however masks significant differences among forecasters: forecasters that were relatively more accurate prior to the announcement were also those who revised their inflation forecasts more markedly.

Suggested Citation

  • Guido Bulligan, 2018. "The effect of the Eurosystem expanded Asset Purchase Programme on inflation expectations: evidence from the ECB Survey of Professional Forecasters," Questioni di Economia e Finanza (Occasional Papers) 455, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_455_18
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2018-0455/QEF_455_18.pdf
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    Citations

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    Cited by:

    1. Joana Garcia & Nikolay Iskrev, 2019. "Inflation expectations in the Survey of Professional Forecasters: An exploratory analysis," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    2. Oinonen, Sami & Viren, Matti, 2021. "Effects of Monetary Policy Decisions on Professional Forecasters' Expectations and Expectation Uncertainty," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(2), pages 245-280.
    3. Stefano Neri & Stefano Siviero, 2019. "The non-standard monetary policy measures of the ECB: motivations, effectiveness and risks," Questioni di Economia e Finanza (Occasional Papers) 486, Bank of Italy, Economic Research and International Relations Area.
    4. Marco Bottone & Alfonso Rosolia, 2019. "Monetary policy, firms’ inflation expectations and prices: causal evidence from firm-level data," Temi di discussione (Economic working papers) 1218, Bank of Italy, Economic Research and International Relations Area.
    5. Guido Bulligan & Francesco Corsello & Stefano Neri & Alex Tagliabracci, 2021. "De-anchored long-term inflation expectations in a low growth, low rate environment," Questioni di Economia e Finanza (Occasional Papers) 624, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    monetary policy announcements; event study; inflation expectations; unconventional monetary policy;
    All these keywords.

    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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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