International spillovers in inflation expectations

Arbeitspapier

This paper investigates the factors behind developments in inflation expectations in euro area, the U.S. and the U.K. over the sample 2005-2015. Our analysis unveils the presence of a quantitatively important spillover from euro area long-term inflation expectations onto international ones, in particular the U.S., since August 2014. This finding has some important implications. From a policy perspective, it contributes to explain the somewhat puzzling declines in financial indicators of inflation expectations since the autumn 2014 (Yellen, 2015). From a research perspective, our findings suggest that the relatively weak performance of term-structure models (and other econometric models) to explain developments in long-term inflation expectations in major economic areas over 2014-15 may be due to the omission of international factors. These two dimensions may well carry a significant weight on the on-going and future debate on monetary policy normalisation in major central banks.

Object Details

• ISBN: 978-92-899-1670-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1857

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Model Evaluation, Validation, and Selection ; Price Level; Inflation; Deflation
• Subject: deflation ; global inflation ; inflation expectations ; international spillovers

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ciccarelli, Matteo ; García, Juan Angel
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/154290
• Last update: 10.03.2025, 11:44 AM CET