How Do Euro Area Inflation Expectations Evolve Over Time?

20 Pages Posted: 6 Mar 2008

See all articles by Magnus Andersson

Magnus Andersson

European Central Bank (ECB)

Jacob Ejsing

European Central Bank (ECB)

Julian von Landesberger

European Central Bank (ECB)

Date Written: February 2008

Abstract

Numerous event studies have documented that financial asset prices react very little to aggregated inflation releases in the euro area. The standard explanation for this non-response is that most of the national price data are already publicly available at the time of the final release. Contrary to the conventional wisdom, this paper shows that asset prices are indeed influenced by euro area inflation data releases. The responses are however limited to regional inflation outcomes published early in the monthly release cycle. On the basis of this finding, the paper proposes a Bayesian updating framework which suggests how investors go about when filtering out the news component in regional and national price releases. The model provides timely measures of aggregated inflation expectations for Germany and the euro area. The measures can hopefully serve as complements to standard survey-based expectations collected weeks ahead of the actual publication.

Keywords: Monetary policy, learning

JEL Classification: E52, E58, G14

Suggested Citation

Andersson, Magnus and Ejsing, Jacob and von Landesberger, Julian, How Do Euro Area Inflation Expectations Evolve Over Time? (February 2008). Available at SSRN: https://ssrn.com/abstract=1102464 or http://dx.doi.org/10.2139/ssrn.1102464

Magnus Andersson (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jacob Ejsing

European Central Bank (ECB) ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
00496913445312 (Phone)

Julian Von Landesberger

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
114
Abstract Views
1,020
rank
271,922
PlumX Metrics