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Effects of ECB Balance Sheet Policy Announcements on Inflation Expectations

17 Pages Posted: 13 Mar 2014  

Richhild Moessner

Bank for International Settlements (BIS)

Date Written: March 12, 2014

Abstract

We investigate whether ECB balance sheet policy announcements in the wake of the global financial crisis have affected the ECB's monetary policy credibility as measured by long-term inflation expectations, by looking at their effects on euro area inflation swap rates of maturities up to 10 years. We consider asset purchase programmes and long-term refinancing operations with maturities above 6 months. We find that these announcements only led to a slight increase in long-term inflation expectations. We therefore find no strong evidence to suggest that ECB balance sheet policy announcements have led to much higher long-term inflation expectations, suggesting that the monetary policy credibility of the ECB has not been harmed by these policies.

Keywords: Monetary policy, central bank communication, balance sheet policies, inflation expectations

JEL Classification: E52, E58

Suggested Citation

Moessner, Richhild, Effects of ECB Balance Sheet Policy Announcements on Inflation Expectations (March 12, 2014). De Nederlandsche Bank Working Paper No. 416. Available at SSRN: https://ssrn.com/abstract=2407919 or http://dx.doi.org/10.2139/ssrn.2407919

Richhild Moessner (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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