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Inflation News and Euro Area Inflation Expectations

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  • Juan Angel Garcia
  • Sebastian Werner

Abstract

Do euro area inflation expectations remain well-anchored? This paper finds that the protracted period of low (and below-target) inflation in the euro area since 2013 has weakened their anchoring. Testing their sensitivity to inflation and macroeconomic news, this paper expands existing results in two key dimensions. First, by analyzing all available (advanced) inflation releases. Second, the reactions of expectations are investigated at daily, time-varying and intraday frequency regressions to add robustness to our conclusions. Results point to a significant impact of inflation news over recent years that had not been observed before in the euro area.

Suggested Citation

  • Juan Angel Garcia & Sebastian Werner, 2018. "Inflation News and Euro Area Inflation Expectations," IMF Working Papers 2018/167, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2018/167
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    References listed on IDEAS

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    Cited by:

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    3. Corsello, Francesco & Neri, Stefano & Tagliabracci, Alex, 2021. "Anchored or de-anchored? That is the question," European Journal of Political Economy, Elsevier, vol. 69(C).
    4. M. Ayhan Kose & Hideaki Matsuoka & Ugo Panizza & Dana Vorisek, 2019. "Inflation Expectations: Review and Evidence," Koç University-TUSIAD Economic Research Forum Working Papers 1904, Koc University-TUSIAD Economic Research Forum.
    5. Ricardo Reis, 2020. "The People versus the Markets: A Parsimonious Model of Inflation Expectations," Discussion Papers 2033, Centre for Macroeconomics (CFM).
    6. James Yetman, 2020. "Pass-through from short-horizon to long-horizon inflation expectations, and the anchoring of inflation expectations," BIS Working Papers 895, Bank for International Settlements.
    7. Inês da Cunha Cabral & Pedro Pires Ribeiro & João Nicolau, 2022. "Changes in inflation compensation and oil prices: short-term and long-term dynamics," Empirical Economics, Springer, vol. 62(2), pages 581-603, February.
    8. Baumann, Ursel & Darracq Pariès, Matthieu & Westermann, Thomas & Riggi, Marianna & Bobeica, Elena & Meyler, Aidan & Böninghausen, Benjamin & Fritzer, Friedrich & Trezzi, Riccardo & Jonckheere, Jana & , 2021. "Inflation expectations and their role in Eurosystem forecasting," Occasional Paper Series 264, European Central Bank.
    9. Byrne, David & Zekaite, Zivile, 2019. "Euro area longer-term inflation expectations revisited," Economic Letters 12/EL/19, Central Bank of Ireland.
    10. Ricardo Reis, 2020. "The People versus the Markets: A Parsimonious Model of Inflation Expectations," Discussion Papers 2033, Centre for Macroeconomics (CFM).
    11. Nikos Apokoritis & Gabriele Galati & Richhild Moessner, 2025. "Inflation Expectations Anchoring: New Insights from Microevidence of a Survey at High Frequency and of Distributions," International Journal of Central Banking, International Journal of Central Banking, vol. 21(1), pages 201-234, January.

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