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How anchored are inflation expectations in EMU countries?

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  • van der Cruijsen, Carin
  • Demertzis, Maria

Abstract

Anchored inflation expectations help stabilize inflation. Previous results indicate that monetary policy has been effective in breaking the link between actual and expected inflation at the euro area level. In this paper we examine whether this is also true at the national level. We define the ‘disconnect’ between inflation and inflation expectations and then proceed to examine the extent to which this disconnect exists for a number of euro area countries. Our findings suggest that for some countries, their own inflation experiences still affect national inflation expectations, and certainly more by comparison to how they affect the aggregate euro area level.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 1 ()
Pages: 281-298

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:1:p:281-298

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Inflation expectations; Monetary policy; EMU; Inflation; ECB;

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References

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  1. Antulio N. Bomfim & Glenn D. Rudebusch, 1997. "Opportunistic and deliberate disinflation under imperfect credibility," Working Papers in Applied Economic Theory 97-07, Federal Reserve Bank of San Francisco.
  2. Orphanides, Athanasios & Williams, John C., 2005. "Expectations, learning and monetary policy," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 29(11), pages 1807-1808, November.
  3. Alex Brazier & Richard Harrison & Mervyn King & Tony Yates, 2006. "The danger of inflating expectations of macroeconomic stability: heuristic switching in an overlapping generations monetary model," Bank of England working papers 303, Bank of England.
  4. Hein, Eckhard & Truger, Achim, 2005. "European Monetary Union: nominal convergence, real divergence and slow growth?," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 16(1), pages 7-33, March.
  5. Guenter W. Beck & Kirstin Hubrich & Massimiliano Marcellino, 2009. "Regional inflation dynamics within and across euro area countries and a comparison with the United States," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 24, pages 141-184, 01.
  6. Maria Demertzis & Andrew Hallett & Ole Rummel, 2000. "Is the European union a natural currency area, or is it held together by policy makers?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 136(4), pages 657-679, December.
  7. Riemer P. Faber & Ad C. J. Stokman, 2009. "A Short History of Price Level Convergence in Europe," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(2-3), pages 461-477, 03.
  8. Maria Demertzis & Massimiliano Marcellino & Nicola Viegi, 2009. "Anchors for Inflation Expectations," DNB Working Papers, Netherlands Central Bank, Research Department 229, Netherlands Central Bank, Research Department.
  9. Maria Demertzis & Nicola Viegi, 2005. "Inflation Targets as Focal Points," Working Papers 02, Economic Research Southern Africa.
  10. Rogers, John H., 2007. "Monetary union, price level convergence, and inflation: How close is Europe to the USA?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(3), pages 785-796, April.
  11. Nigel F.B. Allington & Paul A. Kattuman & Florian A. Waldmann, 2005. "One Market, One Money, One Price?," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
  12. Marilyne Huchet-Bourdon, 2003. "Does single monetary policy have asymmetric real effects in EMU ?," Post-Print halshs-00143785, HAL.
  13. Allington, Nigel FB & Kattuman, Paul A & Waldmann, Florian A, 2005. "One Market, One Money, One Price?," MPRA Paper 835, University Library of Munich, Germany.
  14. Becker, Bettina, 2009. "Ten years of European Monetary Union: Introduction," Economic Modelling, Elsevier, Elsevier, vol. 26(4), pages 741-743, July.
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Cited by:
  1. Ehrmann, Michael & Soudan, Michel & Stracca, Livio, 2012. "Explaining EU citizens’ trust in the ECB in normal and crisis times," Working Paper Series, European Central Bank 1501, European Central Bank.
  2. Pierdzioch, Christian & Rülke, Jan-Christoph, 2013. "Do inflation targets anchor inflation expectations?," Economic Modelling, Elsevier, Elsevier, vol. 35(C), pages 214-223.
  3. Rodrigo Mariscal & Andrew Powell & Pilar Tavella, 2014. "On the Credibility of Inflation Targeting Regimes in Latin America," IDB Publications 86253, Inter-American Development Bank.

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