Tail Comovement in Option-Implied Inflation Expectations as an Indicator of Anchoring

Cecchetti, Sara; Natoli, Filippo; Sigalotti, Laura

doi:10.2139/ssrn.2722436

Cited by 40 publications

(14 citation statements)

References 102 publications

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“…A symptom of this risk is the tendency of long-term inflation expectations to move together with short-term expectations. The increase in correlation between short-and longterm expectations has been documented by Cecchetti, Natoli and Sigalotti (2015) and Natoli and Sigalotti (2016). The authors show that the probability of downward changes in shortterm expectations becoming associated with variations in longer-term expectations has increased substantially until the end of 2014.…”

Section: Inflation Developments: Facts and Explanationsmentioning

confidence: 91%

Monetary Policy in a Low Interest Rate Environment

Ferrero

Neri

2017

SSRN Journal

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The debate on the underlying causes of the decline of interest rates to historically low levels is ongoing both in academia and among policy makers. Several explanations have been put forward, ranging from those citing real and structural factors to those underscoring the importance of cyclical and financial phenomena. However, the empirical evidence regarding their relative importance is still limited. These different but complementary views can be framed around the concept of the natural rate of interest and the monetary transmission mechanism. The low interest rate environment that still characterizes advanced economies raises important questions regarding the implications for monetary policy in the medium-and long-run. Our work provides a systematic outline of the potential changes to monetary policy strategies that could ensue.

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Section: Inflation Developments: Facts and Explanationsmentioning

confidence: 91%

Monetary Policy in a Low Interest Rate Environment

Ferrero

Neri

2017

SSRN Journal

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“…Source: based on Taboga (2016) and Cecchetti, Natoli and Sigalotti (2015). Last observation: 15 January 2018.…”

Section: The Macroeconomic Impact Of the Appmentioning

confidence: 99%

The Non-Standard Monetary Policy Measures of the ECB: Motivations, Effectiveness and Risks

Neri¹,

Siviero²

2018

CCM

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This paper examines the challenges faced by the European Central Bank since the outbreak of the global financial crisis. From 2008 to 2014, the need to preserve the correct functioning of the monetary policy transmission mechanism and ensure the supply of credit to the private sector stretched the limits of conventional monetary policy. In 2015, the risk of deflation led the ECB to start a large scale asset purchase programme. The analysis is largely based on a review of the many studies that Banca d’Italia staff has produced on the factors that have brought inflation to unprecedented low levels in 2014 and on the effects of the asset purchase programme. Zusammenfassung Dieser Beitrag untersucht die Herausforderungen, vor denen die Europäische Zentralbank seit dem Ausbruch der globalen Finanzkrise steht. Von 2008 bis 2014 hat die Notwendigkeit, das ordnungsgemäße Funktionieren des geldpolitischen Transmissionsmechanismus zu wahren und die Kreditversorgung des privaten Sektors sicherzustellen, die Grenzen der konventionellen Geldpolitik überschritten. Im Jahr 2015 führte das Deflationsrisiko dazu, dass die EZB ein groß angelegtes Anleihenkaufprogramm aufnahm. Die vorliegende Analyse basiert im Wesentlichen auf einer Überprüfung der zahlreichen Studien, welche die Mitarbeiter der Banca d‘Italia zu den Faktoren erstellt haben. Diese Faktoren haben einerseits die Inflation 2014 auf ein beispiellos niedriges Niveau gebracht und andererseits Auswirkungen auf das Programm zum Ankauf von Vermögenswerten zur Folge gehabt. JEL Classification: E31, E43, E52

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“…Gefang, Koop and Potter (2008) used US and UK financial-market-based data from 2003 to 2008 and found, for both countries, evidence of a 'contained' pass-through of inflation expectations, meaning that medium-term expectations do respond to movements in actual inflation, but remain within a narrow range around the central bank's policy target. 4 More recently, Cecchetti, Natoli and Sigalotti (2015) have applied different methodologies to detect tail co-movements in financial-market-based inflation expectations at different horizons in the euro area, from the end of 2009 to February 2015. They find that, since mid-2014, negative tail events impacting short-term inflation expectations have spurred downward revisions also in long-term ones.…”

Section: Introductionmentioning

confidence: 99%

The Evolution of the Anchoring of Inflation Expectations

Buono

Formai

2016

SSRN Journal

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We investigate the degree of anchoring in inflation expectations for different advanced economies using data from professional forecasters' surveys. We define expectations as anchored when movements in short-run expectations do not trigger movements in expectations at longer horizons. Using time-varying parameter regressions, we provide evidence that anchoring has varied noticeably across economies and over time. In particular, we find that starting from the second half of 2008, inflation expectations in the euro area, unlike in the US and in the UK, have shown signs of a de-anchoring.JEL Classification: E31, E52, D84, C14.

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Tail Comovement in Option-Implied Inflation Expectations as an Indicator of Anchoring

Cited by 40 publications

References 102 publications

Monetary Policy in a Low Interest Rate Environment

Monetary Policy in a Low Interest Rate Environment

The Non-Standard Monetary Policy Measures of the ECB: Motivations, Effectiveness and Risks

The Evolution of the Anchoring of Inflation Expectations

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