The (de-)anchoring of inflation expectations: New evidence from the euro area |
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| Affiliation: | 1. Bank for International Settlements, Representative Office for Asia and the Pacific, 78th Floor, Two IFC, 8 Finance Street, Central, Hong Kong;2. Hitotsubashi University, 2-1 Naka, Kunitachi-shi, Tokyo, 186-8603 Japan;1. School of Economics, Hongik University, Seoul, Republic of Korea;2. School of Statistics, University of International Business and Economics, Beijing, China |
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| Abstract: | Well-anchored inflation expectations are a key factor for achieving economic stability. This paper provides new empirical results on the anchoring of long-term inflation expectations in the euro area. In line with earlier evidence, we find that euro area inflation expectations have been anchored until fall 2011. Since then, however, they respond significantly to macroeconomic news. Our results obtained from multiple endogenous break point tests suggest that euro area inflation expectations have remained de-anchored ever since. |
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| Keywords: | Anchoring of inflation expectations Break-even inflation rates News-regressions Multiple structural break tests E31 E52 E58 C22 |
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