The Evolution of Inflation Expectations in Euro Area Markets

Gimeno, Ricardo; Ortega, Eva

doi:10.2139/ssrn.2877655

Cited by 5 publications

(6 citation statements)

References 49 publications

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“…It shows that the inflation compensation on swaps fluctuates more than the expectations indicated in the survey, reflecting a greater ability to react to any new information received by agents, although both time series exhibit very similar trends over time. 6 This same result is obtained if the survey and swaps are compared at longer terms (see Gimeno and Ortega, 2016).…”

Section: Measurement Of Inflation Expectations For the Various Countries And Termssupporting

confidence: 55%

“…1 This article updates the analysis and summarises the main ideas and results reported in Gimeno and Ortega (2016). 2 These may include, for example: differences in dependence on oil, such that the same change in world oil prices has different impacts on short-term inflation in different countries; or fiscal measures adopted by a specific country which affect its indirect taxes or its regulated prices; or different wage dynamics reflected in different pressures on prices.…”

Section: Measurement Of Inflation Expectations For the Various Countries And Termsmentioning

confidence: 99%

“…a Factors obtained from the model of Gimeno and Ortega (2016), which estimates the term structure of inflation compensation using daily financial data for expected inflation at terms of 1 to 30 years. There dynamic factors are identified which allow identification of the term structure and its behaviour over a period of several years: the long-term level, the slope or difference between the long and short term, and the curvature or transition from the short to the long term.…”

Section: Measurement Of Inflation Expectations For the Various Countries And Termsmentioning

confidence: 99%

“…a Breakdown obtained using the model of Gimeno and Ortega (2016). whole period for expected inflation at medium-term time horizons, namely one-year forward four years ahead and five-year forward five years ahead, i.e.…”

Section: Measurement Of Inflation Expectations For the Various Countries And Termsmentioning

confidence: 99%

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Euro Area Inflation Expectations

Gimeno

Ortega

2018

SSRN Journal

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This study explores the recent dynamics of inflation expectations for the main euro area countries. It uses daily financial data for the main euro area countries over the past 15 years with a wide range of time horizons. The estimation of a model of the term structure of inflation expectations using these data allows the common part to be separated from the countryspecific part. It is found that, for the various time horizons and countries, the bulk of expected inflation is common to the whole euro area. The weight of country-specific factors is low, being most significant for the shorter term. For time horizons between five and ten years, the estimated inflation expectations showed a downward trend from 2012, which has reversed in the last two years owing to the application of a broad set of unconventional monetary policy measures in the euro area since mid-2014. Still, in the past year, medium-term inflation expectations have held below 2%, around 1.7% on average, clearly lower than in the period before the economic crisis.In contrast to these limitations, the financial markets provide abundant daily real-time information on inflation expectations. First, there are indexed sovereign bonds which provide protection against future inflation. In the euro area, although these bonds are issued by national authorities, most are indexed to the inflation of the euro area as a whole and thus do not provide information on the expected inflation in each country. Moreover, they are scantly comparable across countries owing to their different liquidities and risk levels. Second, traded daily on the markets are inflation swaps linked to the inflation of the euro area and of its main countries (France, Italy, Spain and Germany), with 15 maturities ranging from 1 to 30 years, which contain information on the expected future course of

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Section: Measurement Of Inflation Expectations For the Various Countries And Termssupporting

confidence: 55%

Section: Measurement Of Inflation Expectations For the Various Countries And Termsmentioning

confidence: 99%

Section: Measurement Of Inflation Expectations For the Various Countries And Termsmentioning

confidence: 99%

Section: Measurement Of Inflation Expectations For the Various Countries And Termsmentioning

confidence: 99%

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Euro Area Inflation Expectations

Gimeno

Ortega

2018

SSRN Journal

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“…They generally suggest that expectations are not homogenous and they supported our first hypothesis. Quite recent example by Gimeno & Ortega (2016) explored the behaviour of inflation expectations in France, Germany, Italy, and Spain. They pinpointed considerable differences in inflation expectations across these countries only at short maturities.…”

Section: Literature Overviewmentioning

confidence: 99%

Spatial Approach to Heterogeneity of Inflation Expectations in the Euro Area

Tura-Gawron¹,

Szyszko²

2018

Proceedings of the 10th Economics &Amp; Finance Conference, Rome

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In this article, we examine the spatial heterogeneities in inflation expectations of the euro area consumers. We expect to find them heterogeneous in our research period of 2001-2016. Contrary to standard examination of heterogeneity, a spatial correlation analysis is applied by referring to global and local correlation measures. It is performed with the economic distance-based weights (the difference in HICP rates). Application of spatial analysis is the main contribution of our examination. Standard examinations ignore spatial relations and might be misleading. Our findings suggest that expectations are heterogeneous once the differences of inflation rates represent economic distance between the countries that we cover by our examination.

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Macroeconomic and financial effects of oil price shocks: Evidence for the euro area

Morana

2017

Economic Modelling

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The paper investigates the macroeconomic and financial effects of oil prices shocks in the euro area since its creation in 1999, with a special focus on the recent slump. The analysis is carried out episode by episode, within a time-varying parameter framework, consistent with the view that "not all the oil price shocks are alike", yet without imposing any a priori identification assumption. We find evidence of recessionary effects triggered not only by oil price hikes, but also by oil price slumps in some cases, likewise for the most recent episode, which is also rising deflation risk and financial distress. In addition through uncertainty effects, the current slump might then be depressing aggregate demand by increasing the real interest rate, as ECB monetary policy is already conducted at the zero lower bound. The increase in real money balances following the slump points to the accommodation of the shock by the ECB, concurrent with the implementation of the Quantitative Easing policy (). Yet, in so far as failed to generate inflationary expectations within the current and expected environment of soft oil prices, the case for a more expansionary use of fiscal policy than in the past would become compelling, in order to counteract the deflationary and recessionary threats to the euro area.

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The Evolution of Inflation Expectations in Euro Area Markets

Cited by 5 publications

References 49 publications

Euro Area Inflation Expectations

Euro Area Inflation Expectations

Spatial Approach to Heterogeneity of Inflation Expectations in the Euro Area

Macroeconomic and financial effects of oil price shocks: Evidence for the euro area

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