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Economic surprises and inflation expectations: Has anchoring of expectations survived the crisis?

Author

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  • Grothe, Magdalena
  • Lejsgaard Autrup, Søren

Abstract

This paper analyses price formation in medium- to longer-term maturity segments of euro area and US inflation-linked and nominal bond markets around the releases of important economic indicators. We compare the pre-crisis and crisis periods, controlling for liquidity effects observed in financial markets. The results allow us to draw conclusions about the anchoring of inflation expectations in the two currency areas before and during the crisis. We find a somewhat stronger anchoring of inflation expectations in the euro area than in the United States. During the crisis, the degree of anchoring of inflation expectations did not change in the euro area, but it decreased to some extent in the United States. JEL Classification: E44, G12, G01

Suggested Citation

  • Grothe, Magdalena & Lejsgaard Autrup, Søren, 2014. "Economic surprises and inflation expectations: Has anchoring of expectations survived the crisis?," Working Paper Series 1671, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20141671
    Note: 1601201
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    break-even inflation rates; inflation expectations; inflation markets; macroeconomic announcements; nominal and real bond yields;
    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
    • G01 - Financial Economics - - General - - - Financial Crises

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