Arbeitspapier

Unconventional monetary policy and the anchoring of inflation expectations

The effects of the unconventional monetary policy (UMP) measures undertaken by the U.S. Federal Reserve (and other major central banks) remain a crucial topic for research. This paper investigates their effects on the anchoring of long-term inflation expectations, a key dimension of UMP that has been largely overlooked. Our analysis provides two key insights. First, the anchoring of inflation expectations deteriorated significantly since late 2008. Second, the expansion of the Fed’s balance sheet contributed decisively to prevent and gradually reverse that de-anchoring during the Great Recession. Using a SVAR framework extended to incorporate policy news, we show that accounting for the predictable path of the balance sheet following the Fed’s asset purchase announcements is fundamental to properly assess the effects of UMP.

ISBN
978-92-899-2717-8
Language
Englisch

Bibliographic citation
Series: ECB Working Paper ; No. 1995

Classification
Wirtschaft
Interest Rates: Determination, Term Structure, and Effects
Financial Markets and the Macroeconomy
Model Evaluation, Validation, and Selection
Large Data Sets: Modeling and Analysis
Subject
inflation expectations
news shocks
unconventional monetary policy

Event
Geistige Schöpfung
(who)
Ciccarelli, Matteo
García, Juan Angel
Montes-Galdón, Carlos
Event
Veröffentlichung
(who)
European Central Bank (ECB)
(where)
Frankfurt a. M.
(when)
2017

DOI
doi:10.2866/00394
Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Ciccarelli, Matteo
  • García, Juan Angel
  • Montes-Galdón, Carlos
  • European Central Bank (ECB)

Time of origin

  • 2017

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